FRM Exam Preparation

The world is currently in a dark place with the ongoing rise in coronavirus cases. The adverse effects brought about by the pandemic are despicable. People and industries alike have been affected. There is an imminent risk of companies going bankrupt, employees losing their jobs, to mention a few. A risk manager, one of the career paths that an FRM can follow, is mandated with the responsibility of, among other things, ensuring that a company stays afloat in times like this.

What is FRM?

Financial Risk Management, FRM, is an exam certification offered by the Global Association of Risk Professionals, GARP. To attain an FRM charter, registered candidates have to attempt and pass both FRM Part 1 and FRM Part 2. By enrolling for and pursuing the FRM certification, candidates increase their expertise in the risk management field.

Requirements for Registration

There are no educational prerequisites needed before registering for the FRM exams. A candidate, with or without a university education, can register to sit for an FRM exam. To register, candidates have to part with a one-time enrollment fee of $400. After that, for FRM Part I, candidates have to pay $425 for early registration, $550 for standard registration, and $725 for late registration. For FRM Part II, candidates have to pay $350 for early registration, $475 for standard registration, and $ 650 for late registration.

FRM Exam Dates

FRM Part I

FRM Part II

Apart from the FRM Part II May exam date, which will be a written exam, all the other exams will be computer-based. This is one of the significant changes the GARP made as a result of Covid-19. Other changes that came about in 2020 include:

• Reducing the number of FRM Part 1 readings from 69 to 60, 59 of which have been re-written by members within GARP and not externally outsourced.
• For FRM Part 2, GARP has changed some of the topic weightings, introduced a new topic (Liquidity and Treasury Risk), and added resiliency to Part II’s operational risk section.

The changes made should not be confused for a less challenging exam. To maintain its reputation and standards, the GARP has maintained the rigor, breadth, structure, and length of the FRM exams.

It is important to note that candidates are free to attempt both FRM Part I and II on the same day. However, Part II will only be marked upon passing Part I. Upon passing both parts, candidates have to present relevant work experience, in a risk field, of at least two years before been awarded an FRM charter.

Exam Format

Both FRM Part I and Part II are multiple-choice exams. FRM Part I comprises 100 questions, whereas FRM Part II consists of 80 multiple questions; both parts have to be attempted in four hours. All the questions in an FRM exam carry the same weight. It should be noted that there are no penalties given for wrong answers. For this reason, a candidate can opt to ‘guess’ instead of leaving a question blank. ‘Guess” as in use elimination method to arrive at the best of the choices provided.

FRM Topics

FRM Part I and Part II topics both revolve around risk.

FRM Part I

FRM Part II

Preparations for FRM Exams

The average study period reported by candidates and already qualified FRMs is 240 hours for each of the FRM Parts. However, this time is subject to a person’s knowledge of the FRM exams’ topics. It could be shorter or longer, depending on a person’s prior understanding of the topics tested. Candidates with prior knowledge have reported having used less time, 100 hours, to prepare for the FRM exams. Those with no prior knowledge have used as much as 400 hours for the same. The topics of the various parts, as shown above, should not mislead candidates into believing that they can be covered in a shorter time. In as much as FRM examines a smaller number of topics compared to CFA® exams, the topics are much narrower and much more detailed. In addition to that, the topics take a more mathematical approach. They, therefore, require a great deal of understanding, practice, and more practice.

There is a notable difference between understanding concepts, especially mathematical concepts, and applying them in an exam like manner; this is why candidates need to practice. Practice and get acquainted with answering styled exam questions. It is the ticket to a good score on the actual exam.

FRM Part I & Part II Complete Course

Notable Differences between FRM Part I and II

• FRM Part I has a lower pass rate than FRM Part II. The 2019 pass rates of 45.9% for FRM Part I and 58.6% for Part II. This is most likely due to the fact that candidates getting to Part II are much more serious. Also, in case a candidate sits both exams in the same exam cycle, the FRM Part II exam is not graded if you do not pass Part I.
• FRM Part I exam has 20 more questions than FRM Part II, but the questions are often shorter and more straightforward than FRM Part II questions.
• Part II topics primarily teach candidates about tools used to analyze risk, whereas Part II delves deeper into the tools’ applications.

Comparison between CFA and FRM

Similarities

Both CFA and FRM are unrivaled professional certifications in the field of finance.

For both CFA and FRM, to qualify for a charter, an individual has to attempt and pass a set of challenging exams, in addition to providing proof of relevant work experience.

Main Differences

Are FRM Exams Difficult?

Most companies prefer to hire employees who are members of at least one professional body. Besides having strict registration and membership requirements, most professional bodies offer very challenging and rigorous exams. GARP is not an exception.

So yes, FRM exams are quite tricky. Candidates who’ve pursued both FRM and CFA found FRM I to be more challenging than CFA level I. The November 2019 pass rate of 45.9% (FRM Part I) and 58.6% (FRM Part II) should tell you just how much challenging FRM exams are.

However, this should not scare you from attempting professional exams, and in particular, the FRM exams. These exams increase your knowledge and expertise in your chosen field and, as a result, increase your chances of securing better jobs or getting promotions. Our role as AnalystPrep is to ensure that you get the best preparation tools that will enable you to pass your FRM exams on your first attempt. You may consult this page to know more: https://analystprep.com/frm-part-1-pass-first-attempt/

Where Can an FRM Work?

In a world full of uncertainties, it shouldn’t be hard for an FRM, whose primary role is to assess, quantify, and manage risk, to secure a job. An FRM works in various risk departments of financial institutions, banking industries, trading companies, wealth management firms, asset management firms, and credit rating agencies. ICBC, HSBC, PWC, KPMG, and Citigroup are some of the top global companies that employ FRMs. The top global banks that hire FRMs include ICBC, China Construction Bank, Wells Fargo, Bank of America, Bank of China, and JP Morgan Chase Bank.

Salary of an FRM

On average, an FRM earns an annual salary of $101,000. Of course, the amount can be higher or lower depending on several things, including the specific risk department handled by the FRM, job category, and hierarchy in the firm.

Why such a Low Exam Pass Rate?

As you prepare for your FRM exams, you must note the below-cited reasons as to why most candidates, as seen in the 2019 pass rates above, fail to pass their exams;

1. Procrastination – Candidates fail to start their exam preparation early enough. By postponing tasks and leaving everything for a last-minute rush, candidates reduce their chances of passing the FRM exams. You are advised to register for the FRM exams as soon as you can. You are equally advised to start reading for your exams immediately after registering for them.
2. Failure to carefully read and understand the questions – In an attempt to finish exams within the stipulated time, candidates might be tempted to scheme through a problem instead of reading and understanding it. By doing so and by the nature of the exams’ structure (multiple-choice exam), candidates might miss a keyword and end up picking the wrong answer.
3. Underestimating the exams – This mostly affects candidates with a background in finance. They tend to underestimate the difficulty of the CFA exams. They tend to give less weight to topics that they consider easy simply because they had perfect scores on those topics while in school.
4. Cramming exam content – Leaving everything for a last-minute rush will force a candidate to cram concepts instead of understanding them. Candidates are advised to understand and be able to apply the concepts and not just cram them.
5. Challenging exams –Inadequately managed risk can lead to massive losses. For this reason, in a bid to produce extremely qualified risk managers, and at the same time filter out the unqualified ones, GARP sets challenging exams that will only be passed by individuals who’ve perfectly understood the risk management concepts.
6. Failure to practice – “Practice makes perfect.” Candidates should purpose to practice. Do not just go through the study notes; make time to attempt practice questions. Of more importance, ensure that you have gone through former FRM exams and have attempted at least a few exams before sitting for your exam. The exposure to exam styled questions will give you the much-needed confidence to face your exams. You may find AnalystPrep’s packages for FRM exams here: https://analystprep.com/shop/unlimited-package-for-frm-part-i-part-ii/

Should you Pursue FRM?

FRM is the future of finance. There will always be a need to assess and maintain risk in an organization. As a result, there will always be a need for a Financial Risk Manager. Whether you should pursue FRM or not is a personal decision. However, you should know that the risk management field is a growing field, and as with any growing field, it promises a lot of opportunities.