Objective

In today’s dynamic financial landscape, the importance of risk management is underscored. The Financial Risk Manager (FRM) designation, awarded by the Global Association of Risk Professionals (GARP), is recognized globally as a mark of expertise in financial risk management.

In this blog, the scope and benefits of the FRM designation will be explored. The significance of this credential in the finance industry, along with its advantages for professionals and organizations, will be highlighted. Whether as an aspiring financial risk manager or a seasoned professional seeking to enhance credentials, the value of the FRM designation will be examined.  

FRM Designation-A Brief Elucidation 

Financial Risk Manager [FRM] is a designation given by GARP [Global Association of Risk Professionals] that reflects a true standard of excellence in the field of Risk Management. The designation is earned after passing two levels of challenging & rigorous exams and at least 2 years of work experience in any field related to risk management.

FRM Exams- An Overview 

The FRM program follows the major strategic disciplines of risk management: market risk, credit risk, operational risk, and investment management. The FRM examination is divided into two levels.  

1. Part 1 of the FRM exam has 100 questions classified into 4 modules [weighted alongside].  

1. Foundations of Risk Management. [20%] 
2. Quantitative Analysis. [20%]    
3. Financial Markets & Products. [30%] 
4. Valuation & Risk Models. [30%]     

2. Part 2 of the FRM exam has 80 questions that are classified into 6 modules [weighted alongside]. 

1. Market risk measurement & Management. [20%]
2. Credit risk measurement & Management. [20%] 
3. Operational risk & Resiliency. [20%] 
4. Liquidity & Treasury risk measurement & Management. [15%]
5. Risk Management & Investment Management. [15%] 
6. Current Issues in Financial Markets. [10%]  

The questions are practical and related to real-world work experiences. Candidates are expected to understand risk management concepts and approaches as they would apply to a risk manager’s day-to-day activities. The exam is recognized in over 90 countries and is designed to measure a financial risk manager’s ability to manage risk in a global environment. 

Benefits of FRM designation 

1. Indicator of Exceptional Risk Management Skills.

The FRM designation reflects your exceptional risk acumen & understanding, In addition to that the process of earning the FRM designation empowers your anticipation & understanding of risk.   

2. Long-Term Career Growth 

The FRM designation will enhance your growth opportunity. The designation will not change your career overnight, but the knowledge & skills gained will ensure that you stand out in your field which will indirectly lead to Growth and scaling up the Ladder in an efficient manner. 

Let’s say you are a risk analyst with 2 years of experience, and you just earned your FRM designation, so the time by which you will move forward will be generally lesser than anyone in risk related field, and due to the reputation of FRM as a gold standard in risk management, you will be more accessible to global opportunities.    

[Note- It feels this is such a generalisation that the FRM holder will move faster than others in the risk domain, there is a simple logic for that which says that the Non-FRM candidate will learn with circumstances and experience, while the FRM has already got an advanced knowledge in a short span of time and usually FRM holders start applying the ideas in day to day risk activity, now this is a huge differentiator bound to create an exponential effect] 

3. Competitive edge 

With the FRM designation, this is sure that you will have an added advantage, you are no more equal to your colleagues with the same risk experience and technical knowledge, and you will be far ahead in terms of opportunities. 

[ Let’s say you and your colleague both with the same set of risk experience apply to a global risk-related position, but you being an FRM, there is a higher chance of you being selected in context to your colleague or any other non-FRM with the same experience and skill set]. 

Scope of FRM designation

The scope of FRM is quite broad, be it Industry-wise or geographically. The scope is truly unlimited because the designation is also accompanied by a variable factor. The variable factor can be level of Experience (High/Low), Exposure to projects (Large Scale/Small scale), and technical skills (Beginner/advanced in Python, R). It depends on these variable factors what you can achieve with the FRM designation because the scope & opportunity are truly unlimited across the risk-related domain.  Being the Gold standard in the risk management Industry, it sets you apart. 

One more interesting thing is that as the world economy is evolving the complexity of the financial world is increasing, thus the risk is evolving, and “Risk Management” is going to be crucial for any domain and in the coming future the demand and scope of the designation will be huge.

Conclusion 

 The reasoning given above truly gives an Idea of the FRM exam, the benefits & scope of the FRM designation as well as variables associated with the designation that serves to be crucial. One thing which is important is that the FRM designation will not change your career in a day, most aspirants presume that a sudden shift is bound to happen [Salary growth, Senior position] as soon as he earns FRM designation which is a myth. The change happens when you start to apply the “skills & knowledge” in your day-to-day risk role. So on an ending note, we can say that FRM is a good designation to have as it provides you with advanced risk knowledge, but it is best when applied in a risk role and supplemented with correct variables.