All you need to know about Financial Risk Management Certification

All you need to know about Financial Risk Management Certification

Financial risk is a part of every financial institution, and financial risk management is vital for their success. Financial enterprises require highly skilled financial risk analysts, and you can achieve this by attaining a financial risk management (FRM) certification.

What is financial risk management in business?

Wikipedia defines financial risk management as financial instruments and tools to manage risk exposure and protect the company’s economic value. The business’s risk can be operational, credit, market, inflation, legal, and other types of risk. The scope of work is to identify the source of risk, assess it, and come up with solutions to address it.

Every major bank and financial firm in the world has a financial risk management department and practices. However, financial risk is not limited to banking but is a crucial operation area in asset management companies, hedge funds, and financial regulators.

There are four main categories of financial risk:

  1. Market risk involves the threat of changing market conditions in which the company operates. The company should assess market risks and find ways to adapt or react to market changes to thrive.
  2. Credit risk is the company’s risk of extending credit services to customers since they may default on payment or its credit risk with suppliers. The company has to honor its credit obligations to its suppliers to maintain this relationship.
  3. Liquidity risk – asset liquidity risk refers to how swiftly a company can convert its assets into cash when there is an emergency need for additional cash flow. The company should get enough money when revenues are low to pay for expenses and maintain daily operations.
  4. Operational risk – these are the risks that result from daily company activities and internal processes such as lawsuits, personnel challenges, and fraud.

The company management is not able to control all the risks to which the company is exposed. For a business to be successful, it is important to anticipate these risks and put in measures to mitigate them.

Requirements to work in financial risk management

If you are interested in a career in financial management, you will need the following education, professional qualifications, and qualities.

  • FRM certification: this is the leading global certification for managers that is recognized globally. Having an FRM certification will give you an edge and help you stand out in an increasingly competitive financial industry. The certification will prove that your skills are up to international standards and connect you to a vast network of financial risk experts. You do not need any prerequisite degree or work experience to enroll in the course.
  • Graduate degree: having an MBA or doctorate in finance, economics, or statistics is an excellent way to equip yourself for a career in financial risk management. At least a bachelor’s degree is required.
  • Analytical and strategic skills: financial risk management involves working with a lot of data, which requires you to analyze large quantities of information and identify risks and opportunities. You should be able to plan out effective strategies to mitigate these risks.
  • Financial knowledge: working in financial risk management requires an in-depth understanding of financial concepts.
  • Interpersonal and communication skills: financial risk managers should have adequate skills to translate and communicate multifaceted financial reports and processes in ways that others can easily understand. Interpersonal skills will help you interact and work well with your colleagues.

What career can I have in financial risk management?

If you want to have a career in financial risk management, you will likely work in financial institutions such as banks, asset management companies, and brokerages. Other types of businesses such as insurance, oil, and gas companies. The following designations are the most common:

Risk manager

As a risk manager, you will help businesses identify and evaluate risks that could potentially affect them in the future. You will be responsible for analyzing various investment approaches such as asset allocation, fixed incomes, and hedge funds.

Operational risk manager

As an operational risk manager, your responsibility is to investigate how an organization or business is run and prepare future risks that present a danger to the company. As an operational risk manager, your goal is to moderate risks to the company as much as possible and avoid financial losses.

Credit risk manager

As a credit risk manager, you will be responsible for developing and implementing company guidelines and measures to reduce the credit risk for the financial institution. You will also be responsible for building and managing economic models that predict credit risk exposure to the company.

Chief risk officer

With an FRM certification, you can work your way to this executive office. As a chief risk officer, you will assess and mitigate significant threats to the institution’s capital and income at the executive level. These risks can be from competitors, new regulations, or technology.

Risk analyst

Risk analyst professionals apply analytical skills and knowledge on international business and currency markets to evaluate various investment portfolios and calculate the risk involved.

Regulatory risk analyst

As a regulatory risk analyst, you will study existing and proposed rules and regulations and determine how to apply these to your company. You will also research how these laws will impact businesses in other states and countries.

Get started in your financial risk management career with

To kick off your career in financial risk management, enroll for an FRM certification. Earning this certification will give you the skills and knowledge needed to become a professional risk analyst.

Contact us at and enroll in our study packages to help you study for your exams. We have a vast library of training resources which include multimedia tutorials from our professors. Our up-to-date library of sample questions will help you practice and pass your exam on the first try.