Table 3. Internal control system... | Emerald Publishing

Table 3.

Internal control system assessment matrix for Sharīʿah-compliance

Classification of Sharīʿah non-compliant event			Minor	Moderate	Major
Impact	Internal control	People	Inadequate explanation on product information	Guidelines not followed (no impact on the validity of the contract)	Incorrect formula calculation, repetition of offences by the same personnel, misconception of contracts, business policies not approved by the SC
		Process	Incorrect information in marketing materials on IFIs’ website	Incomplete/inaccurate contract	Invalid contract, financial implication, non-mitigatable
		System	Sharīʿah non-compliant term; e.g. interest	Inflexibility of system to accommodate specific Sharīʿah requirement (i.e. sequence of the contract)	System does not cater for Sharīʿah requirements Conventional system used in IFIs’ operations
	Other risk	Reputational	No media coverage, no reputational issue	Low media coverage	Wide media coverage
		Financial	No financial loss	Low financial implication	Major financial implication, unrecognised income
		Regulatory	Low possibility of regulatory action	Moderate possibility of non-compliant event and regulatory action	High possibility of a non-compliant event and regulatory action
Assessment	Responsibility	Action/resolve	Head of Department/SC	Board audit committee/board risk and management/SC	Board of directors/SC
Assessment	Level of internal control	Indicator	Weak	Very weak	Extremely weak

Classification of Sharīʿahnon-compliant event			Minor	Moderate	Major
Impact	Internal control	People	Inadequate explanation on product information	Guidelines not followed (no impact on the validity of the contract)	Incorrect formula calculation, repetition of offences by the same personnel, misconception of contracts, business policies not approved by the SC
		Process	Incorrect information in marketing materials on IFIs’ website	Incomplete/inaccurate contract	Invalid contract, financial implication, non-mitigatable
		System	Sharīʿah non-compliant term; e.g. interest	Inflexibility of system to accommodate specific Sharīʿah requirement (i.e. sequence of the contract)	System does not cater for Sharīʿah requirementsConventional system used in IFIs’ operations
	Other risk	Reputational	No media coverage, no reputational issue	Low media coverage	Wide media coverage
		Financial	No financial loss	Low financial implication	Major financial implication, unrecognised income
		Regulatory	Low possibility of regulatory action	Moderate possibility of non-compliant event and regulatory action	High possibility of a non-compliant event and regulatory action
Assessment	Responsibility	Action/resolve	Head of Department/SC	Board audit committee/board risk and management/SC	Board of directors/SC
Assessment	Level ofinternalcontrol	Indicator	Weak	Very weak	Extremely weak