If you are planning to expand your career in the field of risk management, becoming a certified Financial Risk Manager (FRM) could be the next step for you.
The certification is offered by the Global Association of Risk Professionals (GARP). For companies, having an FRM in their team signifies that the company takes risk management as important and as serious.
How do you actually become a certified FRM?
Here’s a quick guide:
Step 1: Register to take the exam Part I
There are no educational prerequisites for taking the Part I exam.
You can register yourself to take the exam at www.garp.org.
The exam consists of two parts—Part I and Part II.
Both the parts are offered in the months of May and November each year usually on the third Saturday.
Candidates should also understand that the fee for registering for the exam is segmented into three registration periods namely: early, standard, and late.
You should know that it is possible to take both exam parts—Part I and Part II—on the same day; however, Part II will be graded only if a candidate has cleared the Part I of the FRM exam.
Step 2: Pass the Part I exam
The Part I of the exam is a multiple-choice exam with a focus on the candidate’s understanding of financial risk and its assessment. You will find questions on financial markets, valuation and risk models, financial products, quantitative analysis, and risk management.
There are a total of 100 questions.
The Part I exam requires commitment and dedication. Between the years 2010-2017, only 46% of the candidates appearing for the exam passed this section. So, if you are preparing for the FRM exam, you should put in at least 200-240 study-hours. According to GARP, an average of 275 study-hours is recommended; however, some candidates study up to 400 hours.
Exam results usually take a period of six weeks and are sent directly to a candidate’s email.
Step 3: Register for Part II
Candidates have a period of four years during which they can take the Part II of the FRM exam.
Make sure that you check the costs and register accordingly for the same.
Step 4: Pass the Part II exam
Unlike the Part I exam, Part II only has 80 equally weighted multiple-choice questions. The Part II exam tests the candidates’ ability to apply the concepts learned during the Part I exam.
Candidates are tested on credit risk measurement and management, operational and integrated risk management, market risk management and measurement, and risk management and investment management. In addition, you can also find questions on current issues of the financial markets.
The average pass rate for the Part II FRM exam is slightly better than that of Part I. During the period between 2010 and 2017, 57% of the candidates taking the exam cleared it.
You should put in an average of 240 hours to study for the Part II exam.
Results for the same are received within six weeks.
Step 5: Get your work experience ready
The last step in becoming an FRM certified by GARP is to show that you have at least two years of work experience in the field of risk management. This has to be submitted within five years of passing the Part II FRM exam.
Please note that only finance-related vocations are considered eligible for work experience. Some examples include industry research, portfolio management, risk consulting and trading.
Send a document, demonstrating and describing the role you have undertaken in risk management (in at least five sentences) to GARP. Once you have submitted this document, GARP will confirm your inclusion in its registry and that you have now become an FRM holder. Please don’t forget to submit this document within five years of passing the Part II FRM exam.
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