Risk is an inherent element that exists in every aspect of man’s endevours in this world. It is a fact that man’s life and his activities cannot be spared of risks. So prevalent are risks to man and his organisation that taking them has become an inevitable part of life. As such, the term “Risk Management” has been pushed to the forefront in both micro and macroeconomic management in recent times. It is now seen as a key contributor in sustaining the survival of an organisation, not only in braving the prevailing competitive business landscape, but also in facing the challenges brought about by unpredictable natural disasters.
Since risk is ubiquitous in every facet of human activities, therefore, it carries different meanings in different fields. As varied as the definitions are, all inadvertently include the relationship between time and change in value, particularly of losses incurred. In financial activities, for instance, risk may be defined as a measurement of the potential changes in value of a financial instrument or investment due to differences in the operating environment at the present time and the future. In this regard, risk management techniques will be employed to mitigate any possibility of the instruments or investments being reduced in value or losses incurred due to the impact brought about by underlying risk factors.
Peter Lewyn Bernstein (1919 -2009), an American financial historian, economist and educator, wrote a fascinating account on the understanding of risk throughout the history of the mankind entitled “Against the Gods; The Remarkable Story of Risk”. The book journeys through the centuries of how man changed his perception of risk and relentlessly sought ways to mitigate it. In addition, Bernstein revealed that a long time ago, man acknowledged his weaknesses before God in dealing with the uncertainty of nature and he would condone to whatever disasters that had befallen unto him. Hence, managing risks was not necessary for man in the days of yore. However, along the course of history, man became wiser and learned that he could actually measure risk and take appropriate methods to cushion its severity. Thus, according to Bernstein, man is no longer at the mercy of the gods and is now able to control his own destiny as he is able to minimise risks, and evaluate probabilities and chances. Furthermore, Bernstein relates to us many stories about how the current financial risk management tools, such as, insurance, futures contracts, options and others, had been developed throughout the centuries in order to protect man’s wealth against misfortune and unforeseen calamities.
Fourteen centuries have passed since Allah underscored the significant relationship between time and loss-the two core variables that underpin the modern risk management theory. Allah declares in the Quran: “By (the token of) Time (through the ages), verily Man is in loss, except such as have Faith, and do righteous deeds, and (join together) in the mutual enjoining of Truth, Patience and Constancy.” (103: 1- 3)
Known as “al-‘Asr or “The Time”, the quoted surah is one of the earliest to be revealed to Prophet Muhammad (peace and blessings of Allah be upon him) during his early period of prophethood in Mecca. In spite of its brevity, al-‘Asr succinctly underlines a comprehensive teaching that man needs to heed in his worldly strife. The companions of the Holy Prophet (may Allah be pleased with them) had reported that whenever any two of them met, they would never part without reciting surah al-‘Asr to each other. Even the great Imam al-Shafi’i (150 – 206 AH) (may Allah bless him) was once reported as saying that had nothing else was revealed in the Holy Qur’an except al-‘Asr, it alone would have been sufficient to guide mankind.
Indeed, such power and importance within the three verses underlie the essence of the surah. Al-‘Asr guides man to ponder upon the significant correlation between time and losses incurred, which is known today as a function for measuring risks. By invoking time, it adjures man for a total devotion to God and to perform righteous deeds in order to lessen the impact of any risks involved. Furthermore, al-‘Asr pronounces the way that man can mitigate risks encountered, that is, by engaging with one another in the spirit of truth, patience, and constancy. Significantly, the brief and seemingly simple surah is actually loaded with a comprehensive and powerful foundation of risk management!
Nowadays, risk management practice is growing prominently in managing businesses and organisations. A multitude of standards, frameworks and techniques have been introduced by various international organisations, among which include the generic risk management principles and guidelines of ISO 31000: 2009 standards. They cater not only for the purpose of making risk management a tool, but more importantly, of inculcating risk management as an integral culture for people at all levels in an organisation. In this context, Islamic bodies could derive immense benefits from inculcating and internalising the teachings enjoined in surah al-‘Asr, for they provide Muslims with a solid foundation of a robust risk management culture and framework.
Despite the growing practice of risk management in businesses and organisations, risk managers should exercise caution in their reliance of their standards, frameworks or techniques. For, no matter how polished or sophisticated they are, no one can ever act “against the will or the absolute power of God Almighty”.
