Financial Risk Manager (FRM) is a prestigious professional designation offered by the Global Association of Risk Professionals (GARP). Recognized globally, it signifies expertise in financial risk management across financial markets. Earning your FRM entails passing two rigorous exams and completing two years of professional experience in the risk management domain.
FRMs are known for their deep understanding of risk assessment and are often employed by major banks, insurance companies, accounting firms, regulatory agencies, and asset management companies.
Why Choose FRM Certification?
Key Benefits
- FRMs are accredited by the Global Association of Risk Professionals (GARP).
- They specialize in risk assessment for top financial institutions, including banks and insurance companies.
- Achieving FRM certification involves acing a two-part examination and acquiring two years of relevant work experience.
- The FRM designation offers several advantages such as global professional recognition, enhanced career opportunities, higher income potential, and improved expertise in risk management.
- While the CFA is comprehensive with a wider scope, FRM provides specialized skills in financial risk.
Understanding Financial Risk Managers (FRMs)
FRMs detect threats to organizational assets, earnings, and success. They often work in sectors like financial services, banking, trading, or marketing, with specialization in credit or market risk. This role involves analyzing financial markets and global environments to foresee changes and strategize against potential risks. Accreditation by GARP is essential.
The Financial Risk Manager (FRM) Program
The FRM exam evaluates the implementation of risk management techniques in investment management. To earn the FRM designation, candidates must pass a comprehensive two-part exam and accumulate two years of professional experience in financial risk management. Optional continuous professional development is available post-certification.
Exam Details
Part 1: 100 questions covering:
- Foundations of Risk Management (20%)
- Quantitative Analysis (20%)
- Financial Markets and Products (30%)
- Valuation and Risk Models (30%)
Part 2: 80 questions on:
- Market Risk Measurement and Management (20%)
- Credit Risk Measurement and Management (20%)
- Operational Risk and Resiliency (20%)
- Liquidity and Treasury Risk (15%)
- Risk Management and Investment Management (15%)
- Current Issues in Financial Markets (10%)
Salary and Industry Outlook
The median annual salary for financial managers, including FRMs, was $134,180 in 2020, as per the U.S. Bureau of Labor Statistics (BLS). Employment of FRMs is anticipated to surge by 16% between 2018 and 2028, significantly faster than average for all occupations. This heightened demand transcends beyond financial services into technology, healthcare, and other sectors.
Leading Employers of FRMs
- ICBC
- Bank of China
- HSBC
- Agricultural Bank of China
- Citigroup
- KPMG
- Deutsche Bank
- Credit Suisse
- UBS
- PwC
FRM vs. CFA: Choosing the Right Path
The Chartered Financial Analyst (CFA) designation is globally renowned among financial analysts. While CFA has a broad focus including investment management, the FRM is specialized in managing various financial risks.
FRM Requirements
- Pass both Part 1 and Part 2 of the FRM exams
- Have two years of professional experience in financial risk
CFA Requirements
- Obtain a bachelor’s degree
- Pass Level 1, Level 2, and Level 3 CFA exams
- Become a member of the CFA Institute
- Accumulate 4,000 hours of relevant professional experience
The Perks of the FRM Designation
Attaining the FRM certification is a testament to your skills and knowledge in risk management. It not only enhances your credibility but also provides an in-depth understanding of how to anticipate, respond, and adapt to risks effectively.
FRM FAQs
Is CFA Better or FRM?
This depends on your career goals. FRMs are tailored for risk management roles, while CFAs cater to investment management roles.
Is FRM Tougher Than CFA?
While both are challenging, CFA exams are generally considered tougher due to additional levels and broader coverage.
How Much Does the FRM Cost?
The FRM costs include a $400 enrollment fee, with exam fees of $750 for each part if registered on time, or $550 for early registration.
Conclusion
The FRM remains the premier certification for risk managers, providing specialized knowledge in a growing field. Although the CFA is often deemed more prestigious, FRM’s focus on risk management makes it an invaluable credential for those targeting this niche. Earning this certification promises enhanced job prospects, specialized skills, and the potential for better remuneration in the financial risk management sector.
Related Terms: CFA, Chartered Financial Analyst, risk assessment, financial management certification.
