[OR] [BI] [E1] [C1] Introducing OR Case Study

eBook 1: Chapter 1

Operational Resilience Case Study of Bank Islam

Introduction

Operational resilience begins with a deep and structured understanding of the organisation itself—its purpose, operating model, regulatory context, and unique risk profile.

This chapter introduces Bank Islam Malaysia Berhad (Bank Islam) as the subject of this case study, thereby providing the foundation for applying operational resilience principles in a practical, institution-specific manner.

As Malaysia’s first Shariah-compliant bank, Bank Islam occupies a distinctive position in the financial services landscape. Its mandate extends beyond financial performance to include Shariah compliance, ethical finance, financial inclusion, and trust preservation.

These characteristics introduce additional dimensions to operational resilience, particularly when aligning with Bank Negara Malaysia (BNM) requirements and global best practices such as those advocated by the Basel Committee, BCBS, and international operational resilience frameworks.

This section provides readers with the organisational context necessary to understand why certain services are critical, how disruptions may affect stakeholders, and which resilience capabilities must be prioritised before implementation.

Purpose of Chapter

In Bank Islam’s regulatory, operational, and Shariah-driven environment, the chapter establishes a common understanding of how the bank delivers value to customers and fulfils its obligations to regulators and stakeholders.

This context is essential for appreciating why certain services are deemed critical, how disruptions may materialise, and the unique considerations that differentiate Bank Islam from conventional financial institutions.

The purpose of this chapter is to equip readers with a clear organisational baseline before progressing to the practical aspects of operational resilience implementation.

Readers are expected to understand Bank Islam’s operating environment, governance structures, critical business services, and resilience-related goals, as well as how these elements align with Bank Negara Malaysia (BNM) expectations and global best practices.

By the end of the chapter, readers should be able to articulate the rationale for adopting an operational resilience approach tailored to Bank Islam and be prepared to apply this understanding in subsequent chapters focused on design, assessment, and execution.

Understanding Your Organisation: Bank Islam

Bank Islam operates as a full-fledged Islamic financial institution, offering a comprehensive range of retail, corporate, investment, and digital banking services in compliance with Shariah principles.

Its business model integrates traditional banking operations with Islamic finance contracts, governance structures, and Shariah oversight mechanisms.

From an operational resilience perspective, Bank Islam’s organisational structure can be viewed across several interrelated dimensions:

• Business Functions – customer-facing services, treasury operations, financing, deposits, and digital banking.
• Support Functions – technology, human resources, risk management, compliance, Shariah governance, and vendor management.
• Decision-Making Structures – Board of Directors, senior management committees, and Shariah governance bodies.
• Delivery Channels – branches, ATMs, online banking platforms, mobile applications, and third-party service providers.

Understanding how these components interact is critical to identifying critical business services, mapping dependencies, and assessing tolerance for disruption.

Bank Islam’s Operating Environment

Bank Islam operates within a highly regulated and risk-sensitive environment, shaped by both domestic and international influences. Key elements of its operating environment include:

1. Regulatory Landscape

   • Oversight by Bank Negara Malaysia (BNM)
   • Compliance with frameworks such as Risk Management in Technology (RMiT), Business Continuity Management, and Operational Risk guidelines
   • Alignment with the Islamic Financial Services Board (IFSB) standards

2. Shariah Governance Requirements

   • Mandatory adherence to Shariah rulings and fatwas
   • Oversight by a Shariah Committee, introducing additional governance and approval layers

3. Digital and Technology Dependencies

   • Increasing reliance on digital banking platforms
   • Heightened exposure to cyber threats, system outages, and third-party technology risks

4. Customer and Market Expectations

   • Demand for always-on banking services
   • Sensitivity to service disruptions that could undermine trust and reputational standing

These environmental factors significantly influence Bank Islam’s tolerance for environmental impacts, recovery priorities, and investment decisions related to operational resilience.

Composition of an Operational Resilience Team for Bank Islam

Effective operational resilience requires a cross-functional, enterprise-wide approach.

For Bank Islam, the Operational Resilience Team should reflect both regulatory expectations and the bank’s Islamic governance structure.

A typical composition may include:

• Board and Senior Management Oversight
  • Board Risk Committee
  • Senior Management Committees responsible for risk and resilience
    
    
• Core Control Functions
  • Risk Management
  • Compliance
  • Business Continuity Management
  • Information Security and Technology Risk
    
    
• Business Representatives
  • Owners of critical business services
  • Operations and channel management leaders
    
    
• Technology and Third-Party Stakeholders
  • IT infrastructure and application owners
  • Vendor and outsourcing management teams
    
    
• Shariah Governance Representation
  • Liaison with the Shariah Committee to ensure resilience strategies do not compromise Shariah compliance

This multidisciplinary structure ensures resilience considerations are embedded into strategy, design, operations, and crisis response.

Critical Business Services of Bank Islam: Key Considerations for Operational Resilience

Critical business services are those that, if disrupted, would cause intolerable harm to customers, financial stability, or the bank’s obligations under Shariah and regulatory requirements.

For Bank Islam, identifying critical business services requires consideration of:

• Customer Impact – inability to access funds, financing, or payment services
• Regulatory Impact – breaches of BNM requirements or reporting obligations
• Shariah Impact – disruptions that compromise Shariah-compliant transactions
• Financial and Reputational Impact – erosion of public trust in Islamic banking

Rather than focusing solely on internal processes, operational resilience shifts the focus to end-to-end service delivery, encompassing people, processes, technology, facilities, data, and third-party dependencies.

Key Characteristics of Bank Islam

Several defining characteristics shape how operational resilience should be designed and implemented at Bank Islam:

• Shariah-Centric Operations – resilience measures must align with Islamic finance principles
• High Trust Expectations – customers expect ethical conduct and service reliability
• Hybrid Delivery Model – reliance on both physical branches and digital channels
• Strong Regulatory Oversight – frequent supervisory engagement and audits
• Growing Digital Footprint – increased exposure to operational and cyber risks

Recognising these characteristics enables the bank to tailor resilience strategies that are proportionate, practical, and compliant.

Establishing Organisational Goals for Operational Resilience

The final step in understanding the organisation is defining clear, strategic goals for operational resilience. For Bank Islam, these goals should align with its business strategy, regulatory obligations, and Islamic values.

Key organisational goals may include:

• Ensuring the continuous delivery of critical banking services during disruptions
• Protecting customers from intolerable harm, especially in times of crisis
• Maintaining compliance with BNM, Shariah governance, and international standards
• Strengthening preparedness against severe but plausible disruptions
• Embedding resilience into decision-making, change management, and investment planning

These goals provide the guiding principles for the second section of this eBook—Implementing Operational Resilience for Bank Islam—where frameworks, methodologies, and practical steps are translated into actionable capabilities.

This chapter has established the foundational understanding required to approach operational resilience at Bank Islam in a structured and context-driven manner.

By examining the bank’s operating environment, governance structure, critical business services, and defining characteristics, the chapter highlights that operational resilience is not a generic framework but rather one that must be shaped by regulatory expectations, Shariah governance requirements, and the bank’s service-delivery model.

This organisational insight ensures that resilience efforts are anchored in real business priorities and focused on protecting customers, maintaining trust, and meeting supervisory obligations.

With this organisational baseline in place, Bank Islam is now positioned to move from understanding to action.

The insights gained in this chapter provide the necessary reference point for identifying critical services, setting impact tolerances, and mapping dependencies in a way that is both proportionate and effective.

The next section of this eBook builds on this foundation by translating these insights into practical methodologies, governance mechanisms, and implementation steps that will enable Bank Islam to strengthen its ability to withstand, respond to, and recover from severe but plausible disruptions.

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Implementing Operational Resilience for Bank Islam: Aligning with BNM and Global Best Practices
eBook 1: Understanding Your Organisation: Bank Islam
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