Mohammed Burhan Arbouna^
1. Introduction
The Shari[ah (Islamic law) is a legal system that considers interest or
expectations of the contracting parties. It sanctions any mechanism that
serves the objectives of the contracting parties. The price risk has become a
modern business reality. This axiomatically made risk management a
prerequisite for businesses to survive market shocks. A survival of businesses
and protection of wealth is a Shari[ah a requirement. Thus, measures that
protect wealth against risks are logically within the teachings of Shari[ah. This
means that a failure to protect investment funds against risks do not comply
with requirements of Shari[ah in which case the entrepreneur may be held
liable under the principles of negligence, misconduct and unprofessional
management.
In complying with the requirements of protecting wealth, we noted that
the jurists had discussed mechanisms of mitigating risks of losses,
misrepresentations or product defect. This is exemplified in the number of
traditional Shari[ah options, such as khiyar al-majlis, khiyar al-shart, khiyar al-
[ayb, khiyar al-naqd, to mention but few. The rationale for allowing these risk
management mechanism is to allow the contracting parties a time to think
about the contract and to avoid harm that may overwhelm them when the
contract continued. The jurists also established principles of guarantees for
the same purpose, notably daman al-dark, which may be translated as
guarantee against market misrepresentation. It is noted that the jurists are not
(^) BA Shari[ah (LLB), Islamic University, Medina; MCL (Master’s of Comparative
Law), Ph. D. in Laws, International Islamic University, Malaysia. The author is a
Shari[ah Advisor at Kuwait Finance House, Kingdom of Bahrain.