What are the Financial Risk Manager (FRM®) Designations?

Financial risk managers are a vital part of the financial services industry. Earning an FRM certification will set you apart in the industry.

What is the FRM designation?

The FRM certification is offered globally by the Global Association of Risk Professionals (GARP). Certified FRMs have an edge in the industry because employers recognize them as the gold standard for risk management. Attaining the certification proves to the employers that you can anticipate business risks, prepare for, and put a response mechanism to mitigate this risk.

Your FRM certification shows that your knowledge and skills are up to international standards in an increasingly competitive and fast-paced financial world. Your employer will consider you as an asset to the company.

The FRM certification is more specialized towards investments and risk management. The curriculum includes quantitative analysis, financial markets and products, foundations of risk management, valuation and risk models, market risk management, credit risk management, operational and integrated risk management, investment risk management, and current issues in financial markets.

However, not all financial risk managers have the FRM certification.

What does a financial risk manager do?

A financial risk manager is responsible for identifying threats to the business. They analyze financial data and market changes to forecast risks that will be detrimental to the company. In addition, they come up with coping strategies to mitigate these risks.

Financial risk managers work in financial institutions such as banks, asset management institutes, sales, trading, and loan origination.

The financial risk manager designation is a lucrative career with plenty of employment opportunities. The salaries for these positions are lucrative, with an average of $55,000 to $150,000 annually.

How do I earn the FRM certification?

You can easily earn your FRM designation in the following steps.

I. Enroll and register for the FRM part I exam

You can enroll and register for the FRM part I exam by visiting the GARP website. You do not need prior education or work experience to qualify for the program.

You will pay a one-time enrollment fee of USD 400 on your initial registration. The early exam registration fee is USD 550, and the standard exam registration fee is US 750. The registration fees, however, do not include study materials. 

The exam windows for FRM part I beginning 2021 are in May, July, and November. Part II exam widows are in May and December. You may take exams for both on the same day, but you will only be graded for part II if you pass part I.

II. Register for RFM part II after passing part I

GARP requires you to pass part I FRM exams before proceeding to part II. Part I exam has 100 multiple-choice questions that cover the following topics;

1. Quantitative analysis
2. Foundations of risk management concepts
3. Financial markets and products
4. Valuation and risk models

Less than half of the candidates who register for part I exams usually pass the exam. You will need to study for at least 240 hours and up to 400 hours to understand the concepts and practice taking the exam using sample questions. When your results are available, you will get a notification and access them in your GARP candidate portal.

Once you have passed the FRM part I exams, you have up to four years to register for part II. You will only have to pay for exam registration, and the early exam registration fee is USD 550, while the standard exam registration fee is USD 750. FRM part II exams are in May and December.

III. Pass FRM part II Exam

The FRM part II consists of 80 multiple choice questions that cover the following topics;

• Market risk measurement and management
• Credit risk measurement and management
• Operational and integrated risk  management
• Liquidity and treasury risk measurement and management
• Risk management and investment management
• Current issues in financial markets

The average pass rate for part II is a little above half. You will need as much commitment and studying as part I. You will need to read for at least 240 or more and practice using sample questions to ensure that you pass the exams.

IV. Get the required two years of experience

The last step you need to take to get your FRM certification is to prove that you have gained at least two years of full-time work experience in a relevant role. You should submit evidence of your work experience after you have passed your FRM part II exams.

GARP defines relevant work experience as to where you are in a role where you are involved in the identification, measurement, monitoring, or management of risk. Experience up to ten years before sitting for FRM exams is acceptable.

You should submit your work experience within five years after completion of the course. If you fail to submit it within the given timeframe, you will need to re-enroll in the program, pay all the fees and retake both FRM part exams.

What jobs are available with the FRM designation?

The FRM certification gives you skills essential in assessing and predict risk and putting in place measures and procedures to mitigate this risk.

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 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.

Market risk analyst/ market risk managers – Market risk managers apply their knowledge and study market trends to provide investors and companies with comprehensive market assessment reports.

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