Risk Management Certifications
The role of risk management in the financial services industry has recently come to the forefront as being critical to companies going forward. Risk Managers can ensure that companies act responsibly by maximizing profits while at the same time avoiding risky behaviors that have negative consequences. Risk Managers must be able to provide critical advice in a complex, global marketplace that is continually evolving.
Financial risk management certifications enable Risk Managers to advance their expertise and distinguish themselves as leaders in their field. Many financial institutions now require their employees to obtain a risk management certification. Additionally, many hiring firms also require or strongly prefer that candidates have a risk management certification. Gaining certification will ensure an individual of increased recognition, interesting job opportunities and a higher salary.
Risk Management Certifications Available
There are two widely recognized financial risk management certifications that provide substantially the same level of international industry recognition. The Financial Risk Manager (FRM) is offered by the Global Association of Risk Professionals (GARP) and the Professional Risk Manager (PRM) is offered by the Professional Risk Managers' International Association (PRMIA).
Preparing for Exams
GARP: Financial Risk Manager (FRM) - There are numerous training course providers and online schools that offer FRM training courses. Some courses are offered in a classroom setting while others are offered as online courses or self-study videos. GARP also makes available a study guide and practice test on their website.
PRMIA: Professional Risk Manager (PRM) - Most courses for this certification are offered online by various training providers including PRMIA themselves. Self-study online courses are available from PRMIA as well as other vendors and classroom and in-house training are also available in select locations from PRMIA.
Exam Content
FRM - This exam has two levels. Level 1 covers core areas of risk management including quantitative analysis, financial markets and products, and risk modeling. Level II focuses on the practical implementation of risk management techniques used to manage credit, market and operational risk. This exam also covers current issues in financial markets.
PRM – There are four exams that must be passed to gain this certification as listed below. Alternately, one can take the Complete Professional Risk Manager exam which combines the content of all four exams. The individual exams take from one to two hours and contain either 24 or 36 multiple choice questions each. Individual exams have pass rates between 50% and 75%. The four exams are:
- Finance Theory: Financial Instruments and Markets
- Mathematical Foundations of Risk Measurement
- Risk Management Practices
- Case Studies: PRMIA Standards of Best Practice, Conduct and Ethics, Bylaws
Obtaining Certification
FRM - To gain certification and the right to use the "FRM" designation after one's name, a candidate must pass two exams and have at least two years of applicable experience. They must also be an active member of GARP. Exams are given twice a year in May and November in major cities in the U.S. as well as many cities around the world. Registration is completed through the GARP exam registration page.
PRM - To gain this certification and the right to use the "PRM" designation, candidates must be a member of PRMIA and pass all four certification exams or the one combined exam. Exams are taken at Pearson Vue locations which can be found at their website.
Who Should get Risk Management Certification?
Virtually any analyst or manager working in the financial services industry should consider obtaining a risk management certification. Those who are directly responsible for identifying and mitigating risk are obvious candidates but others who have roles such equity analyst, management consultant or credit manager would also benefit from certification. Students who intend on specializing in risk management may want to get a jump start on their career by obtaining PRMIA's PRM certification.
Evaluating Training Options
Risk Management certification exams are difficult to pass with success rates as low as 40% for some exams. To ensure proper preparation the following factors should be considered when choosing a training provider:
- Experience Level – When choosing appropriate training, it is helpful to consider one's own experience level and to choose training that complements it. For instance, a person with minimal risk management experience may want to choose a comprehensive classroom program and get the self-study guide as well.
- Logistics - Classroom courses are not widespread so, depending on a person's location, this type of training may not be an option. However, there are many online courses and self-study programs available which makes taking a course possible for just about anyone.
- Reputation - Since not all training providers have the same quality of materials or instructors, it is usually a good idea to research the reputation of a training provider before making a selection.
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