Financial Risk Manager: Understanding the Certification

financialriskmanagerWould you like to become a financial risk manager? One of the most important risk management qualifications is the Financial Risk Manager (FRM) certification, issued by the Global Association of Risk Professionals.

The FRM certification indicates that a risk manager has knowledge and experience in the four most important strategic domains of risk management: operational risk, credit risk, market risk, and investment management.

Since the FRM certification is very difficult to obtain, it’s important to be prepared for the study and exam process. In this guide, we’ll look at the FRM designation in detail, covering aspects like the career benefits and the certification process.

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What is the Financial Risk Manager (FRM) designation?

Risk management is one of the most important aspects of finance. A risk manager’s role in an investment bank, corporation, or asset management firm involves looking at the potential risks of markets, investments, and transactions.

The Financial Risk Manager designation is a professional certification that indicates an individual’s experience and competence in risk management. Due to its difficulty, it’s thought of as one of the most valuable certifications for risk managers.

Over 26,000 people have passed the Financial Risk Manager certification exams, and an estimated 21,000 FRMs are currently practicing today. Most FRMs work in banks, accountancy companies, and large corporations with in-house finance departments.

Why should you become a Financial Risk Manager?

After the financial crisis, overall employment in the finance industry declined. Fewer banks hired investment bankers, fewer applicants completed the process of gaining finance-related certifications, and the industry as a whole slumped.

Except for in one area: risk management. Since the financial crisis, the demand for risk managers has grown steadily throughout the industry. Job opportunities have increased at almost all of the major investment banks and multinational firms.

Gaining the Financial Risk Manager designation is an important part of developing a career in risk management. A FRM certification puts you ahead of your peers, giving you a huge advantage when applying for high-level risk management positions.

Since the FRM certification is one of the most challenging financial qualifications to obtain, it immediately makes you stand out to hiring managers. All of the 25 largest international banks hire FRMs to fill their most important risk management roles.

Beyond the career benefits of the Financial Risk Manager certification, there are a wide range of educational benefits. The FRM certification requires immense study, making the process of acquiring an FRM designation a huge learning experience.

Finally, there are networking benefits to the FRM certification. Over 27,000 people are certified Financial Risk Managers, and gaining the certification for yourself is a great way to expand your professional network and discover new opportunities.

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The five stages of the FRM certification process

Becoming a certified Financial Risk Manager is far from simple. The process involves five steps, including two challenging exams. Less than half of the people that begin a Financial Risk Manager certification pass their exams and gain the designation.

The five stages of the FRM certification process begin with the two exams – the Part I Exam, which involves 100 multiple choice questions, and the Part II Exam, which is made up of 80 multiple choice questions.

Once candidates have passed the two FRM exams, they’re required to demonstrate at least two years of work experience in a related field. Because of this, many people only begin the FRM process after working in another finance-related position.

At this point, candidates become a Certified Financial Risk Manager. However, this isn’t the end of the FRM process. After becoming a Financial Risk Manager, there is still 40 hours of continuing education to pursue over the next two years.

Preparing for the FRM Exam Part I

Are you studying to become a Financial Risk Manager? The first step on the path to a career in risk management is the FRM Exam Part I. The Part I exam tests candidates on four aspects of risk management:

  • Quantitative Analysis
  • Foundations of Risk Management
  • Financial Markets and Products
  • Valuation and Risk Models

Each aspect of risk management makes up a different amount of the exam. In order to pass the FRM Exam Part I, participants need to show a broad knowledge of all of the topics discussed in the exam, rather than a specialization in just one discipline.

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Preparing for the FRM Exam Part II

While the Part I Exam focuses on the tools and strategies used in assessing financial risk, the Part II Exam focuses on the practical application of these tools. It’s broken down into five parts, each with a different effect on your final score:

  • Market Risk
  • Credit Risk
  • Operational Risk
  • Risk Management and Investment Management
  • Current Issues in Financial Markets

Like the Part I exam, the FRM Exam Part II is designed to challenge applicants using a wide variety of financial scenarios and questions. It’s made of 80 questions, all of which are multiple choice.

Did you pass the Level I Financial Risk Manager exam? Prepare for Level II with our course, Financial Risk Manager Certification: Level II. With over 47 hours of detailed content, it’s a fantastic resource for anyone studying for the Level II FRM exam.

Are you ready to become certified?

Becoming a certified Financial Risk Manager has huge benefits for your professional life. With the demand for FRMs on the rise, being qualified and capable can help you find work at leading investment banks and asset management firms.

Would you like to learn more about risk management? Our blog post on the primary roles of risk managers is a great summary of the challenges and situations you’ll run into during your career in risk management.