A financial risk manager certification is notoriously hard to get — only 40% of applicants pass the first part of the exam offered by GARP. The second part of the exam only has a 60% pass rate.
But a certificate from the Global Association of Risk Professional proves you have a specialized knowledge that makes you employable all over the world.
If you want to know everything about the FRM certification and how to earn it, then you came to the right place. But first, let’s familiarize ourselves with the role that an FRM does.
What is a Financial Risk Manager?
A Financial Risk Manager is an official designation that qualifies you for professional financial management positions. The accreditation is offered by the Global Association of Risk Professionals or GARP.
That designation doesn’t ensure that you’ll get a position as a financial manager.
But, it does provide you with an internationally-recognized advantage over many colleagues. Many people say it also introduced them to a huge network of risk management professionals.
So what does a financial risk manager do?
Their job is to find potential threats to the success of the contracting business. As the name suggests, an FRM usually specializes in financial matters, so things like loans, banking, marketing, and trading.
An FRM must have a strong sense of the current global marketplace, as well as a solid grasp on economic theory.
It’s their job to predict any changes or potential trends that may affect the business.
However, a financial risk manager doesn’t just identify the threat — they must also deal with it. An FRM is responsible for forming strategies that deal with risks as they arise.
Typically the specialized knowledge gained by an FRM is used at insurance companies, banks, accounting firms, and other management agencies.
The international qualification shows employers that you’re serious and risk management.
These Bureau of Labor statistics show that the median pay for a financial manager in the United States is $127,990 per year. The demand for certified risk managers is only expected to increase in the future.
How Do I Earn a Financial Risk Manager Certification?
If you want to earn a Financial Risk Manager certification, then you must complete an official 2 part exam. There are no professional or educational prerequisites needed for taking the FRM exam.
But, passing the test is no easy task. You can’t procrastinate studying for the FRM exam. It requires at least 250 hours of intense reading and prep.
Many test-takers report that it requires 400-900 hours if you want to be confident going into the exam. This amount of time might seem ridiculous, but it all depends on what type of study habits you have.
If you struggle with dense financial concepts, then you will need to put in more time to understand it. After you pass the test, you must have at least two years of full-time work experience to receive the certification.
In your work position, you must cover things like risk management and portfolio assessments.
Typically, it’s hard to get these types of positions if you don’t have an undergraduate degree in something like business administration, economics, or finance.
If you still don’t have work experience five years after passing the exam, then you will need to retake it. Once you complete the exam and two years of experience, then you will officially become a certified Financial Risk Manager.
GARP FRM Exam Information
The FRM exam is composed of two parts: each multiple-choice. Part one has 100 questions and part two has 80 questions — they’re all weighted equally. You must pass the first part of the exam before you move on to the second part.
You can take both exams on the same day, but most people recommend spacing them out. The first part of the exam deals with the different skills and tools you will need for navigating the position.
It also deals with theories that underlie the techniques of the trade. Part one breaks down into the following components:
- 20% Foundations of risk management
- 20% Quantitative analysis
- 30% Financial markets and products
- 30% Valuation and risk models
The second part of the exam makes you use the skills you learned in the first part of the exam in a real-world context.
It involves specific management issues and current market place conditions. Part two breaks down into the following components.
- 20% Market risk measurement and management
- 20% Credit risk measurement and management
- 20% Operational risk and resiliency
- 15% Liquidity and treasury risk measurement
- 15% Risk and investment management
- 10% Current issues in markets
You can take the FRM exam at two times during the year: November and May. You must pay enrollment and registration fees before you take the exam.
The cost of these fees depends on factors like early-enrollment and the number of times you’ve taken the exam. However, it usually costs between $350 and $725.
Remember that you will need a paper ticket to gain entrance to the exam. Electronic copies of the ticket don’t work. You can take the FRM at 90 different sites around the world. You can get a full list at this link here.
FRM Exam Violations
The GARP staff are strict when it comes to exam violations. If you violate any of their rules, then your test will not be graded. First, make sure you arrive on time — they won’t let you in after the door closes.
Don’t open your exam book or start early. Make sure the calculator falls under the list of approved GARP devices. You can also violate the rules if you use a pencil that wasn’t distributed, or use any erasers, white-out or similar writing instruments.
One big violation is possession of mobile technology — no electronics in the testing room, not even cell phones.
Cheating is a violation, but so are things like working after the instructor has said stop writing and talking with another student. Make sure you don’t write on the back of your ticket or take it with you.
FRM Exam Frequently Asked Questions
Here are some FAQs that new candidates often have about the FRM exam.
What happens if someone passes part two but not part one on the same day?
If you don’t pass the first part of the test, then they will not grade the second part — even if you took them on the same day. The test is cumulative and the second part is an application of the information on the first part.
So, if you fail the first part, then you don’t have the knowledge to succeed in the real-world application. It’s for this reason that we recommend taking part one and part two on separate days.
If I pass part one of the FRM test, but fail part two, do I need to retake part one?
Yes, if you fail the second part you will need to retake the first part. It’s important to master the fundamental information in the test before moving on to part two.
Can I change my exam site?
Yes, you can either have GARP change your exam site, or you can submit a request for a specific site.
Can I get a refund?
No, GARP doesn’t provide refunds on any of its products or tests.
What types of calculators are allowed?
There are only a few types of calculators allowed during the FRM exam. If you use an unauthorized calculator, then they will not grade your test. Here are the types of calculators allowed by the GARP:
- Both versions of the Texas Instruments BA II Plus (also the Texas Instruments BA II Plus Professional)
- Hewlett Packard 10B II,10B II+,20B
- Hewlett Packard 12C (also the HP 12C Platinum and the Anniversary Edition):
Can I get a scholarship?
Yes if you’re a student at school, then you may qualify for the GARP Academic Partner program.
This program covers all the registration fees that come along with the FRM exam. Six students and one facility member can be nominated by a program admin.
If you want to learn more about the scholarship, then send an email to email@example.com.
When should I arrive?
The check-in process for the first exam begins at 7:00 am and doors close at 7:45 am. The check-in process for the second exam starts at 1:00 pm and doors close at 1:45 pm.
We recommend getting to your testing at least an hour early. Remember that once the doors close you cannot gain admittance to the exam.
How to Pass the FRM Exam
Everyone has different study habits, but there are some things you can do that will help ensure you feel prepared during exam day. Here are some tips for getting ready for the FRM exam.
Memorize the Material
Remember that memorizing something is different than reading. While reading is an important part of the studying process, it’s not very helpful unless you’ve been blessed with a photographic memory.
One good way to memorize the material is with more practice problems and less marathon reading sessions.
Practice problems provide real-world concepts that help you remember the core ideas in a pinch. Quick recall is the name of the game — you don’t want to get stuck on problems.
Network with Other Students
If you’re in the business world it’s always important to network. An FRM exam is one way you can make future connections. Start a study group with other individuals trying to pass the test.
Not only will this activity help learn through a group process, but it also helps you make some important relationships.
Everyone taking the exam is going into the financial management field, so if you keep in touch afterward you might hear about potential job offers.
Create a Study Routine
While you may have been able to cram for your high school math test, it won’t work for the FRM.
Instead, we recommend setting aside a good chunk of time each day — say between one and three hours — and devoting yourself to a chapter or concept.
After you’ve familiarized yourself with everything, take a practice test. The practice test will reveal which areas you know and which areas you need to study. Focus on these weak areas.
When you sit down a study we recommend doing it in an environment away from distractions like television and music. Try and turn off your cell phone during the time you study so you aren’t tempted to take a quick social media break.
Get the Right Study Material
When you register for the exam GARP provides you with an ebook for part one FRM exam book. However, if you want to read the ebook for the second part you will need to purchase it from the GARP website.
But, official GARP material shouldn’t be the only thing you study. You can find a variety of questions guides and FRM course material on the web.
These other materials not only reinforce your knowledge but also provide you with practice questions to test your preparation.
Remember to Take Care of Yourself
Don’t try and pull all-nighters to catch up on lost study time. Lack of sleep will only make the time you do study less effective.
Energy drinks and sugary snacks might feel good at the moment, but they lead to big crashes. Make sure you eat a healthy diet and get lots of exercise. This process will reduce some of the stress that the FRM exam causes your body.
Sign Up to Take the FRM Exam Today
If the financial risk manager certification sounds like what you need to succeed in your career, then it’s time to get registered to take the exam. There are three types of registrations: early standard and late.
If you register before January 31st, then you make early registration. Enroll before February 29th and you’ll make standard registration.
If you register after February 29th then you’ll fall in the late category which means higher fees. Registration ends on April 15th. You can register for the FRM exam by following this link here.