Entering the field of financial risk management means you’ll likely need to take the right exam and get the correct certification. Financial Risk Manager is a professional title given by the Global Association of Risk Professionals or GARP.
Those becoming FRMs provide the necessary knowledge to assess risk, and they often work for banks, accounting firms, regulatory agencies, asset management firms, and insurance companies.
You must pass a two-part exam to start your journey towards becoming a Financial Risk Manager. It’s also necessary to complete two years of work experience before this designation will be given out.
Before you decide to go down this career path, it’s important to understand what the FRM Exam and Certification will include. Let’s look at the basics of the exam and what’s necessary if you want to become a Financial Risk Manager.
Steps to Becoming a Certified FRM
If you want to become a certified FRM, you will need to follow these steps:
- Step #1 – Complete your registration to take the FRM Exam Part I
- Step #2 – Begin studying and prepaying for part one exam
- Step #3 – Pass the FRM Exam Part I
- Step #4 – Complete your registration to take the FRM Exam Part II
- Step #5 – Begin studying and preparing part two of the exam
- Step #6 – Pass the FRM Exam Part II
- Step #7 – Gain two years of qualified experience in Financial Risk Management
These steps outline the entire process to become an FRM. The exam is the hardest part.
An Overview of the FRM Exam
The Financial Risk Management Exam covers several topics you will want to study. It’s a collective knowledge test, so everything on part one of the test will be necessary for part two.
A total of 180 questions are found on the FRM Exam, with 100 questions on part one and 80 questions on part two. Once you’ve passed part one of the exam, GARP gives you up to four years to pass part two.
Both parts of the FRM exam will be offered twice per year. They are offered on the third Saturday of May and the third Saturday of November.
Part 1 of the FRM Exam
You will be given four hours to complete part one of the FRM Exam. This section of the exam will cover:
- Foundations of Risk Management
- Quantitative analysis
- Financial markets and products
- Valuation and risk models
Part one of the FRM exam will cover the tools used to assess financial risk.
You must pass part one of the FRM exam before you can take part two. GARP does allow you to take both part one and part two on the same day, but you still have to pass part one first before part two will be graded.
It’s more common for FRM exam takers to take part one and part two on separate days.
Part 2 of the FRM Exam
Even though the second part of the exam is shorter, you still have four hours to complete the exam. Part two of the FRM exam will cover:
- Market risk management & measurement
- Credit risk management & measurement
- Operational and integrated risk management, including the Basel regulatory framework
- Liquidity and Treasury Risk measurement & management
- Investment risk management
- Current Issues
This part of the exam covers the application of the tools used in financial risk management.
5 Quick Tips for Passing the Financial Risk Management Exam
1. Learn the FRM Exam Topics
The information above gives you a blueprint to create a good study plan for the FRM Exam. It’s important to understand the topics covered on the FRM Exam. Study every single topic listed above and make sure you know at least a little bit about all of the concepts included with each topic.
Understanding the concepts will help you pass the FRM Exam. Many of the questions may be able to be answered by using a calculation or a formula. However, if you understand the right concept or the relationship you’re being tested on, you may not need a formula or calculation to come to the correct answer.
2. Start Studying Immediately
The test is only held twice per year, but you don’t want to wait until the last minute to study. It’s recommended you study for at least 200 hours to prepare for the FRM Exam. Trying to cram 200 hours of studying into a few weeks before the exam isn’t a good idea.
3. Create a Study Plan
You should create a study plan including practice questions and practice exams. An FRM prep course or package can be helpful to give you the structure you need. Many offer structured study planners, instructional videos, interactive quizzes, and many other tools to make studying for the FRM Exam easy.
4. Practice Extra in the Final Weeks Before the Exam
The last two weeks before test day should be filled with FRM practice exams. The more you can practice, the more confidence you will have, and the less you will suffer from test anxiety. Make sure you have several practice exams lined up to take the last few weeks before exam day.
5. Create a Plan to Stay Calm on Exam Day
You get a total of four hours to take the exam. No points are awarded for finishing early. Make sure you have a plan to stay calm and use your time wisely on exam day.
On exam day, make sure to reread any questions giving you trouble. If they are still giving you trouble, move on and come back to them later. It’s better to guess if you really don’t know the answer than leaving a question unanswered.
Increase Your Likelihood of Passing the FRM Exam
Choosing a good FRM exam prep course goes a long way to helping you pass the exam. Only 45.9% of those taking part one of the FRM Exam pass it the first time around. The second part has a higher rate of success, with 58.6% passing the exam.
With Bionic Turtle, you gain the tools you need. Those using Bionic Turtle to prepare for the FRM Exam have a 73% pass rate. That’s much higher than the average provided by GARP.
If you’re ready to enter the world of Financial Risk Management and you want to become certified, the FRM Exam is where you will need to start. Schedule your exam and start studying to ensure you have a better chance of passing the first time around.
