Abstract:
The objective of this study is to analyze the relationship between risk management
practices and financial performance in the Islamic window in conventional banks in
Sri Lanka. This study examined the present risk management practices of the Islamic
window and the banks’ financial performance. The study used both the primary data
from survey questionnaires and secondary data from annual financial reports. For
this purpose the present study selects risk environment, risk measurement, risk
mitigation, risk monitoring and internal control as independent variables while
return on assets is utilized as dependent variables for the period from year 2010 to
year 2015. The study used descriptive, correlation, and multiple regression models.
The results revealed that independent variable factors 83.5% impact on return on
assets. This study further revealed that risk environment, risk monitoring and
internal control system have positive significant impact on financial performance,
however, the risk measurement and risk mitigation shown a negative significant
impact on financial performance. The results of the study shed some lights on the
present risk management practices of the Islamic banks in non-Muslim countries. By
assessing their risk management practices and linking them with financial
performance, the study contribute in terms of recommending strategies to strengthen
the risk management practices of the Islamic windows in conventional banks, so as
to increase the overall performance and competitiveness in the Islamic banking
industry.
