Developing the Balanced Scorecard to Assess Investment Risks in Islamic Banks: The Yemeni Environment as a Model

Abstract

this research aims to provide a Proposal Approach to developing a balanced scorecard for the use of assessing investment risks in Islamic banks. The researchers focused on the risks that are unique to Islamic banks from traditional banks, represented by the risk of the rate of return, the displaced commercial risk, the Fiduciary risk, Al- shari’a non-compliance risk, and the risk of investment in capital. To achieve this, the researchers relied on applying the Proposal Approach for three Islamic banks in Yemen due to the availability of their data in the annual reports. The results showed that there is a deficiency in the assessment of investment risks in Islamic banks with regard to the risks the Islamic banks are unique for, such as risk of the rate of return , the displaced commercial risk, the Fiduciary risk, Al- shari’a non-compliance risk, and the risk of investment in capital, It focused its attention on common risks between Islamic and commercial banks, such as credit risks, market risks, liquidity risks, and operational risks. The results also showed an effective role for the balanced scorecard in assessing investment risks in Islamic banks, which enhances the role of risk management in controlling and monitoring of the investment risks and taking appropriate procedures to reduce these risks to the acceptable levels. Keywords: Investment Risks, Risk Assessment, Balanced Scorecard.