Being a certified Financial Risk Manager (FRM) with the Global Association of Risk Professionals (GARP) is a career changer that will set you apart in the global marketplace. The qualification prepares you for a career as a credit risk manager, market risk manager, regulatory risk manager, operational risk manager, or any related position.
But getting the FRM certification would require you to pass the FRM exams in 2 parts. This article explains how to prepare for the FRM exams and answers some key questions about earning your FRM certification.
What are the steps involved in getting the FRM Certification?
There are two steps to successfully qualifying as an FRM.
Pass your Part I and Part II exams. You must pass your Part II exam by 31 December of the fourth year after passing your Part I.
Submit two years of full-time relevant financial risk management work experience. Work experience in which identifying, measuring, monitoring, or managing risk is a meaningful part of the job’s responsibility. FRM applications can be found in many positions, including risk analysis, model validation, trading, portfolio management, treasury, audit, consulting, and many more.
You will have 5 years to submit your work experience after passing your Part II exam. If you have prior experience of up to 10 years before passing your Part II, you can include that in your application.
If you fail to complete these steps within the applicable timelines, you may have to start the process again.
What are the parts of the FRM exams?
The Part I exam is an equally weighted 100-question multiple-choice Exam, and the Part II exam is an equally weighted 80-question multiple-choice Exam. Both Exams are administered via computer-based testing (CBT).
The FRM Exam Part I focuses on the tools used to assess financial risk. They are divided as follows:
Part I: Foundations of risk management concepts
- Quantitative analysis
- Financial markets and products
- Valuation and risk models
Part II: 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
There is a real mix of expertise required in your exam. Sometimes it is a formula and a calculation, and for others, your understanding of the topics will help you answer the question correctly. All of the knowledge you will build up during your studies enables you to get answers correctly and narrows down potentially correct answers for those tricky questions.
The level of mathematical difficulty is similar to undergraduate or introductory graduate-level finance courses at most universities. The FRM Exam is conceptual, but you will need to know important formulas and calculations and how to apply them correctly. Remember, formula sheets are not provided with the FRM exams!
When is the right time to start studying for the FRM exams?
It is recommended that you study a minimum of 200–240 hours for Part I and Part II. There is no easy way to achieve this, so the earlier you start, the better. Both Part I and Part II exams are nearly impossible to pass if all you do is last-minute cramming. You’re going to be tested on your ability to read a question, analyse it, and apply concepts to it.
When taking exams, it is a regular occurrence that questions might be asked that don’t relate to any area of study. Last-minute cramming can lead to panic in an exam, and the best way to pass an exam is to have structured study over an appropriate amount of time.
Figuring out where to start your study can sometimes be the difficult part. Although it is a simple concept, using an expert-led timetable can give you the best chance of passing your exam. This includes videos to learn the concepts, practice questions to test your knowledge and prepare for the exam, summary notes, and mock exams.
Spending some time off work leading up to your exam can help but be careful of burnout and over-studying. However, doing a mock exam could be one of the best things before the real thing. Practice makes perfect! This allows you to appreciate the time and effort of answering all the required questions in a time-sensitive manner.
As a guide, you will have about 2.5-3 minutes per question. Using Learnsignal’s practice questions, you will be able to grade your performance. Remember, it is important not to disregard past questions; repetition is a good thing.
Calmness is key on exam day! In advance, you should have a strategy for your exam:
- Answer all the easy questions.
- Those questions you have an idea about and can go as far as ruling out some of the answers should be next.
- Concentrate on those questions identified at the beginning of the exam as really tough and impossible to answer.
If the questions in the first two groupings are more than 70% of the exam, you are already well on the way to passing.
What should you do after passing the FRM exams?
When you reach this far, the hard work is done, and you are on the way to becoming an FRM. The next step is to submit your work experience. You will be asked to do this after you have been informed of passing your Part II exam.
Once you submit your work experience, you can use designations such as FRM or Certified FRM and include your qualification in emails, business cards, etc.
FRMs are encouraged to complete regular Continuing Professional Development (CPD) to stay up to date and ensure that the level of proficiency present during exams remains. To achieve this, you are required to earn 40 credits, or 40 hours, of CPD every two calendar years.
Your CPD cycle will begin within months of you becoming an FRM allowing you to start submitting credits immediately. To qualify as credits, activities should be educational, relevant to energy or financial risk management, and build on the knowledge and skills to earn your certification.