What is the FRM (Financial Risk Manager) Designation?

If you’re considering a career in finance or risk, it’s a credential that might interest you because it can set you apart in the financial services industry. In this article, you’ll learn exactly what the FRM^® designation is, what a financial risk manager does, how you can become a Certified FRM, and what you can do with the designation.

What the FRM

Offered by the Global Association of Risk Professionals™ (GARP^®), the FRM designation is a financial risk management certification you can earn. Many of the top financial firms employ Certified FRMs because they are seen as having attained the “gold standard” of the industry. The FRM designation indicates that you have a strong understanding of the underlying risk management concepts in today’s ever-changing financial markets. It also lets employers know that you take risk management seriously and that your knowledge has been validated by international professional standards. In addition, you have to pass the FRM Exam, which also demonstrates your expertise.

What a Financial Risk Manager Does

A financial risk manager identifies and analyzes threats to the assets, earning capacity, or success of a business. Financial risk managers work in sales, loan origination, trading, marketing, financial services, or private banking. Many specialize in areas like credit or market risk. They analyze data, financial markets, and world events to forecast changes and trends that can impact a business and suggest or implement strategies for protection.

Not all financial risk managers have earned the FRM designation. To earn the designation, you must complete the FRM Program administered by GARP.

For anyone who wants to be a financial risk manager, the future is bright. Positions in risk management are expected to grow at a rate of 7% over the next decade. In addition, the salaries for these positions are quite encouraging. According to PayScale and other sites, salaries can range from $55,000 to $150,000 annually.

How to Earn the FRM

To earn your FRM designation, you must:

• Take and pass the FRM Exam, which consists of two parts. Part I has 100 multiple-choice questions, and Part II consists of 80 questions. Both parts cover topics such as the foundations of risk management, quantitative analysis, financial markets and products, valuation and risk models, current issues in financial markets, measuring financial risk, and more. There are no degree or work requirements for taking the exams.

• Work full-time in a financial risk role for at least two years.

• Demonstrate your experience to GARP by describing your professional role in financial risk management and submitting it to GARP within five years of passing Part II of the exam.

In our article about how to earn the FRM designation, you can take a closer look at the requirements.

Are you thinking about taking the FRM Exam? Download the free eBook, Before You Sit for the FRM Exam, for invaluable advice from successful FRM professionals.

What You Can Do With the FRM

Those who earn the FRM designation typically hold positions that concentrate on analyzing and measuring risk. These are some of the most common job roles for Certified FRMs:

• Risk analyst: Uses analytical skills and knowledge of international business and currency markets to examine investment portfolios and analyze the risk involved.

• Risk manager: Helps a business identify and assess potential risks that could affect it in the future, zeroing in on potential threats to assets, earning capacity, or success.

• Credit risk analyst: Evaluates financial history to determine if a person or a company is a good candidate for a loan.

• Market risk analyst: Provides companies or investors with a comprehensive market assessment to help them make decisions about investments and future ventures.

• Regulatory risk analyst: Studies new and proposed laws to determine how they will affect a company or firm and recommends ways to ensure compliance.

• Operational risk manager: Investigates how an organization or business is run, looks at the big picture, and fixes or prepares for anything that might harm the company.

• Chief risk officer: Implements policies at the senior executive level to reduce operational risks and minimize losses if a system or process is inadequate or fails.

Although an FRM designation is no guarantee you’ll land a management position or a spot in the C-suite, a significant percentage of Certified FRMs have worked their way up to these levels. You can explore these positions in more detail in this article covering what you can do with the FRM designation.

Ready to Learn More about Earning the FRM

If you’re wondering if earning the FRM designation is right for you, check out these reasons why you should pursue the FRM designation. When you’re ready to get started, Kaplan Schweser has FRM exam prep packages to increase your odds of success!