Risk Management: An In-Depth Guide to Financial Risk Management (FRM)

Certainly! Finance is the most crucial part of how an organisation functions. All resources that are required in a business can only be afforded through various financing methods such as loans, debentures, equity, etc. But, when a business grows, so grows its financial needs, which in turn increases its finance risk. To reduce and manage this risk a business needs a manager, being more specific, such businesses, industries, MNC’s etc needs an FRM. Who is an FRM and what does he do? Full form of FRM is Financial Risk Management. FRM certification is globally recognized for professionals in the field of risk management. A FRM’s job is to analyse, manage, and mitigate financial risks to protect an organization’s assets and ensure its stability.

Key facts about FRM

• The FRM certification is issued by the Global Association of Risk Professional (GARP).
• The FRM program is designed to prepare candidates for real-world risk management situations.
• FRM certified professionals are in high demand by leading companies and banks globally.
• FRMs analyse various types of risks, including market risk, credit risk, operational risk, and liquidity risk.
• There is an exclusive network of over 84,000 Finance Risk Managers worldwide and the FRM designation is recognized in over 190 countries and territories.

FRM Exam Structure and Course Content

The FRM exam primarily consist of two parts:

Part I covers foundational concepts in risk management that consists of the following four subjects that you should pass before you are eligible to attempt part II:

1. Foundation of Risk Managements – This subject covers Risk types, definitions, and risk management framework,
2. Quantitative analysis – QA includes probability, time series analysis, regression analysis, etc.
3. Financial Markets – This includes overview of various financial markets such as equity markets, derivatives, etc,
4. Valuation and Risk Models – It consists of various valuation theories and credit risk models.

Part II consists of more advanced topics and practical applications and includes the following 4 subjects:

1. Market Risk Measurement and Management – It covers the practical strategies for risk measurement and management.
2. Credit Risk Measurement and Management – Covers theories about credit portfolio management.
3. Operational Risk and Resilience – These subjects cover topics such as operational risk framework and business continuity planning (BCP).
4. Liquidity and Treasury Risk Measurement and Management – Liquidity risk management and Treasury risk management covers a major part of this subject.

Candidates should note that they should clear the parts in the given sequence and should score a minimum of 50% in each subject of each part. It’s essential to take the FRM exam Part I before attempting Part II. The FRM course duration typically spans a minimum of one year to complete both exams where Part I is generally conducted in May, July, and November while Part II is offered in May and December.

Who is eligible to appear in FRM exams?

• Anyone who has passed their 12^th standard is eligible to sit for FRM exams. Candidates must clear both FRM exam Part I and Part II in chronological order within the prescribed time limit.
• Candidates are mandatorily required to gather at least 2 years of full-time work experience in financial risk management either during the exams period or after that.

How to Enrol for FRM course?

Basically, you need to visit the official website for FRM which is called GARP website and create an enrolment ID. FRM course fees are divided into enrolment fees and exam fees, enrolment fees are only paid once, and exam fees are paid during registering yourself for the FRM exams. If you register before April 30, then exam fees will be USD 600 while for late comers who register themselves after June 30, it will be USD 800. The one-time enrollment fee is USD 400. These amounts are in USD so they may change with change in exchange rate when paid from India. The payment methods are limited to Credit Cards where GARP accepts MasterCard, Visa, Amex, and Discover, ePay such as Alipay, Wire transfer, and ACH (automated clearing house). A processing fee is charged while using wire or ACH as mode of payment.

Advantages of pursuing FRM

Well! We are only able to decide for pursuing a particular course when we are fully aware of its future scope and perks. FRM does offers a promising scope and several advantages, and it won’t be wrong if we conclude that growing business do need to manage their risk and that makes FRM a viable career option for those who want to take advantage of global recognition and high salary potential. Various advantages of being an FRM are listed below:

• FRM is no doubt a lucrative career option as it has high salary potential, we are amazed to disclose that Top risk managers can earn around $100,00 per year. While freshers can earn at least $750 per year.
• FRM certification opens doors to financial markets and technical systems, enhancing your career prospects.
• With such an all-rounder expertise in the field of finance and risk management, organisations recruit FRM-certified candidates as they find them capable of lowering their risk level and increasing their creditworthiness.
• A FRM gets wonderful opportunities in global networking and career advancement with increased earning potential.
• FRM has high demand in the market making it a worthy career opportunity.

Overall, the scope of FRM is positive. FRM certification could get you placed in both public and private sector jobs with a high paying package. So, if you are interested in pursuing a career in risk management then FRM certification is a rewarding choice.