Financial Risk Manager (FRM) Exam Study Guide

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Financial Risk Manager (FRM) Exam Study Guide

FRM stands for Financial Risk Manager. By the Global Association of Risk Professionals (GARP), FRM certification is a leading certification for risk managers. FRM positions are in high demand because of their apparent ability to anticipate, respond to, and adapt to risk issues. The FRM designation helps banks and financial firms know that you take risk management seriously, and international professional standards validate your knowledge.

1. How do I get an FRM certification?

To get certified, you must pass Part I and Part II of the FRM exam. There are no education or job requirements to take the exam, but after you give both sections, you must show that you have at least two years of work experience in the field of risk. Only finance professionals are considered to have good work experience. Examples include portfolio management, industry research, trade, and risk consulting.

2. What are the criteria for FRM certification program completion?

  • You must pass the FRM Exam Part I and Part II within four years.
  • Candidates must take FRM exam Part I before taking Part II.
  • Demonstrate two years of work experience. This work experience cannot be more than ten years before passing the FRM exam Part II.
  • Certified FRMs are strongly encouraged to pursue 40-hours of continuing professional development (CPD) every two years to maintain the latest risk management practices.

3. When is the FRM exam offered?

Part I and Part II are both offered in May and November. You can attempt both levels on the same day. However, if you do not pass Part I, you will not be scored for Part II.

4. What is the difference between Part I and II of the FRM exam?

Part I of the FRM exam focuses on the tools used to assess financial risk and is always offered in the morning. There are more questions than Part II. Part II focuses on the application of these tools and is ever offered in the afternoon.

5. What is the exam format of a financial risk manager?

Part I and Part II FRM exam are paper and pencil multiple choice exams. Each section is four hours long. Part I has more than 100 multiple choice questions, and Part II has 80.

6. What topics are covered in the FRM exam?

Part 1 tests your knowledge about the tools used for risk management. The topics and their weights are as follows:

  • Foundations of risk management (20%)
  • Quantitative analysis (20%)
  • Financial markets and products (30%)
  • Valuation and risk models (30%)

The topics of Part II are based on applying the tools examined in Part I and weight as follows:

  • Market risk measurement and management (20%)
  • Operational risk and resiliency (20%)
  • Credit risk measurement and management (20%)
  • Liquidity and treasury risk measurement and management (15%)
  • Risk management and investment management (15%)
  • Current issues in financial markets (10%)

7. How difficult is the FRM exam?

The FRM exam is very quantitative, and it takes a long time to master the curriculum. As a result, most people fail Part I then pass, and half of those who take Part II pass it. One of the reasons for this is the variation in the FRM exam questions. Some are straightforward, others seem straightforward but have a trick, and others’ wording can be confusing. Therefore, there will no doubt be questions on the FRM exam that give you trouble. Some self-directed and motivated candidates can pass using a self-study course. But many people use exam prep packages or classes to stay organized and make sure they are ready for exam day.

8. How many hours do I need to prepare for the exam effectively?

For each section, you need to study at least 200-240 hours, and you should start study as soon as you enroll. You will be tested on your ability to read a question, analyze it, and apply concepts to it; if you learn in the last weeks before the exam will not help you. Topics require all the knowledge that can only be gained through a structured, careful curriculum study, not at the last minute.

9. What are the passing rates for the exam?

The FRM exam pass rate is declining overall, especially for Part I. In the 2017 exam, Part I average pass rate was 42%, and for Part II, 53%. The May 2018 Part I pass rate was 41% and 53% for Part II. You can significantly improve your chances of success by learning from other candidates’ experiences and avoiding common study mistakes.

10.If I fail the FRM Exam Part 1, do I need to retake the exam within a specified period?

No, there is no restriction on when you can re-register for Part I of the FRM exam. If you re-register, you will only need to pay the exam fee, and you do not have to pay the registration fee.

11.I have passed the FRM Part 1 exam. Do I need to register for the FRM Part II exam within a specified period?

Yes. Once the candidate has passed the FRM Part 1 exam, they must pass the FRM Part II exam within four years. If a candidate fails to pass the FRM Part II exam within this time frame, they must restart and re-enroll in the FRM exam program.

12.Should I retake the FRM exam if I fail?

Yes, your determination will be tested repeatedly, but remember that greatness lies in the number of times you get up, not knocked down.

Even after receiving unexpectedly disappointing results, keep in mind that GARP allows all candidates to re-sit the exam. You must re-register for the second, third, or fourth re-sit. In each of these cases, you will not have to pay the enrollment fee. You will only pay the exam registration fee. However, after four years, if you still want to retake any level or Part II exams after your first trial, you will have to re-enroll.

13.Can I enroll in FRM Part I and Part II on different dates?

You need to understand that a candidate can only successfully register for the Part II exam when they successfully pass Part I. The second change is that you will have to register to sit in both parts on the same day.

14.Is FRM recognized globally?

The FRM designation is a professional certification offered by the Global Association of Risk Professionals (GARP) and is recognized globally as a premier global certification for financial risk professionals.

15.Which is more valuable, FRM or CFA?

Both credentials hold great value. The CFA charter is more prevalent in its focus and targets a wide range of financial professionals. As mentioned, the FRM position is highly specialized, and there are far fewer FRMs in the world than the CFA, which in itself brings excellent value to credibility. That said, there is a real benefit to having both certificates.

16.What is the eligibility to enroll in the FRM exam?

As such, there are no minimum eligibility requirements for the exam. Even undergraduates (final year of graduation) are eligible to take the FRM Part 1 exam. You can only take FRM Part II once you have completed the FRM Part 1 exam.

17.Where will FRM Exam Part I and Part II be presented?

 Part I and Part II FRM exams are conducted at the exam site. When you are registering for the exams, you can visit the GARP website to see the sites.

18.How much it cost to appear for the FRM exam?

The cost of sitting for the FRM exam depends on when you register. You will have to pay a one-time registration fee of $400. At the time of payment, another aspect that needs to be kept in mind is the earlier you register for the exam, the cheaper it is. For example, during the third deadline, you will be cost $950, while for the first deadline, you will cost $300 less than $650.

The FRM Certification Program enrollment fee is valid for four years, which means you must take the financial risk management certification Part I and II exams during this period.

For more FRM enrollment fee updates you can check here: https://www.garp.org/#!/frm/fees-payments

19.When are FRM results announced?

FRM results are usually announced through email, typically six weeks after the test. You are also provided with quartile results, which allow you to understand how you scored in the exam concerning other participants. Also, the passing score is not disclosed and is determined by the FRM Committee.

20.What is the average salary of a certified FRM?

The position of FRM is valued by top employers and is recognized globally as the highest standard of success in financial risk. As the role of FRM grows, so do its benefits. The average annual salary for financial risk managers in the US is $ 101,404. Financial risk analysts earned about $56,000. At the top of the scale are senior financial risk managers or executives, who make an average of $151,000.

21.Where can I register for the FRM exam?

You can register for the FRM exam at the official site of FRM here: https://my.garp.org/sfdcApp#!/exam/registration/FRM

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