posted on 11-06-2019

Financial Risk Manager

Updated November 6, 2019

What Is a Financial Risk Manager (FRM)?

Issued by the Global Association of Risk Professionals (GARP), the Financial Risk Manager (FRM) designation recognizes individuals who have expert knowledge in the field of financial risk assessment for banks, insurance companies, accounting firms, regulatory agencies, asset and wealth management firms, and other financial institutions. 

Candidates must successfully complete a two-part exam that focuses on the primary strategic disciplines of financial risk management which include: market risk, credit risk, operational risk, and investment management. They are expected to understand the concepts and approaches used in financial risk management applications. Candidates must also have two years of professional work experience in financial risk management. 

FRM Exam and Certification

The exam consists of two parts.

The first part covers the basic concepts required to assess financial risk such as foundations of risk management, quantitative analysis, financial markets and products, and risk models.

The second portion of the exam reviews practical applications of those concepts which include market risk measurement and management, credit risk measurement and management, operational and integrated risk management, risk management in investment management, and current issues in financial markets.

GARP issues a study guide for the exam. Part One has an average pass rate of 44.5%. The average pass rate for Part Two is higher at 55.2%.

FRM vs. CFA

The main difference between the FRM and the CFA (chartered financial analyst) designation is the typical career path of designees. The CFA designation is useful for a career in investment banking, portfolio management, or investment research. An FRM designee is most likely to work in banking or institutional risk management, or for regulatory agencies or risk assessment consulting firms. 

The program requirements are also different. The CFA program requires passing a three-part exam, and completing four years of work experience and/or education in the financial profession, as well as a Bachelor’s degree. The FRM program requires passing a two-part exam, and completing two years of professional experience. The FRM curriculum is more focused on risk management, while the CFA curriculum covers a broader range of financial expertise. Both designations are recognized globally.