What is a Financial Risk Manager (FRM)?
A Financial Risk Manager (FRM) is a professional who is accredited by the Global Association of Risk Professionals (GARP). This rigorous credential certifies that an individual understands financial risk management concepts set by international professional standards.
The GARP FRM is globally recognized as a premier certification for financial risk specialists. Those who earn it stand out when applying for financial and risk-related roles.
FRMs work for insurance companies and various firms and can use financial risk management software to handle challenges in their roles. These tools carry out risk exposure analysis across multiple asset classes while generating financial risk reports.
What do FRMs do?
FRMs play a significant role in identifying, analyzing, and mitigating financial risks for businesses such as banks, insurance companies, and accounting firms. To determine risks, FRMs analyze financial markets, predict trends, and develop strategies to preemptively address potential problems.
Many FRMs specialize in various fields, including market risk analysis, operational risk analysis, regulatory risk analysis, and credit risk analysis. Job descriptions for an FRM vary across titles and industries, but responsibilities include working with internal teams to calculate financial risks, forecasting and analyzing market trends, and developing models and contingency plans to contend with threats.
How to become an FRM
The FRM certification is tailored toward finance experts, professionals transitioning to risk-related roles, and students interested in finance. To become an FRM and receive accreditation, professionals must complete the following:
FRM Exam Part I (100 questions in four hours):
- Foundations of Risk Management (20%)
- Quantitative Analysis (20%)
- Financial Markets and Products (30%)
- Valuation and Risk Models (30%)
FRM Exam Part II (80 questions in four hours):
- Market Risk Measurement and Management (20%)
- Credit Risk Measurement and Management (20%)
- Operational Risk and Resiliency (20%)
- Liquidity and Treasury Risk Measurement and Management (15%)
- Risk Management and Investment Management (15%)
- Current Issues in Financial Markets (10%)
Two years of full-time professional work experience
Both parts of the exam are offered via computer-based testing (CBT). Questions are equally weighted and cover the tools, techniques, and theories in risk management. Upon passing both parts of the exam, a candidate has five years to submit work experience. Related experience might include portfolio management, academia, industry research, consultancy, and auditing.
In addition to the requirements listed above, GARP strongly recommends that FRMs participate in the Continuing Professional Development (CPD) program and earn 40 credit hours every two years while staying up-to-date on industry best practices.
Financial Risk Manager vs. Chartered Financial Analyst
Financial Risk Manager and Chartered Financial Analyst (CFA) are both known financial designations with some work that overlaps. However, these professional distinguishments are slightly different.
An FRM designation is awarded by GARP and focuses on risk management in depth. The CFA designation is awarded by the CFA Institute and covers a broader range of financial curriculum topics, including investment analysis and portfolio management skills. Some professionals opt to earn both designations to demonstrate their full range of competencies.
