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How to Pursue Your Financial Risk Management Certification

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Stepping into the financial market is as exciting as it is daunting. There’s a lot of responsibility, which is one of the reasons why the pros are in such high demand.

So, if you want to climb the ladder in this field, you’ll need to consider obtaining a financial risk management certification (FRM).

It’s not just another piece of paper. The credentials give you the knowledge and capability to deal with financial risks of various degrees, not on that, the FRM is recognized worldwide.

According to the Global Association of Risk Professionals, the FRM is equivalent to an American master’s degree, European Qualifications Framework Level 7, and an Australian Qualifications Framework Level 9.

So, in this article, we’re going to you all you need to know about how you can obtain the certificate yourself. Does that sound good to you? Great. Let’s dive on in!

Do You Have What it Takes?

Before you step foot into the financial scene, be sure you have what it takes. Certain traits and skills will definitely help you along the way.

For example, to be a good risk manager, you must be calm and collected- and we don’t mean superficially.

Why? Because you’ll work with issues where vast sums of money are at stake, so each of your decisions has to be calculated and precise.

You’re the specialist who has to deal with problems as they arise, while simultaneously supporting the company during a crisis. Needless to say, this is somewhat of a tall order!

Aside from excelling under pressure, you also need an in-depth understanding of finances. This means following the news and financial trends, observing changes in the market, and even training yourself to predict possible twists and turns.

Not only that, but your knowledge will also help you to understand the inner workings of the company that’s hired you. Namely, because you’ll need a firm understanding of the financial strategies and plans they’ve implemented both in the present and in the past, so you can then improve upon their methodology, after all, that’s your direct duty.

Any experience in the finance sector is appreciated. Undoubtedly, there’s a difference between academic knowledge and hands-on experience.

It’s better yet to combine the two, which why financial risk management certification is crucial for your success in this career. Your experience might give you insight into a problem or strategies that could help.

There’s also a more technical part of the work. Risk specialists will have to communicate with regulators.

After the financial crisis that shocked the world in 2008, the government placed many restrictions on the finance field. You’ll have to keep up to date with regulations that affect your company or the market in general.

How to Get a Financial Risk Management Certification

You can only get the financial risk management certification by passing the exam, which is organized by the Global Association of Risk Professionals (or GARP).

The certification will serve as proof that you have the knowledge and expertise to start working with risk management, as well as validate your skill on an international scale.

The first thing you need to do is register on the GARP website. There’s no required previous education; therefore, if you wish to expand your options, you simply have to pass the exam.

The financial risk management certification can be obtained in two parts: FRM Part 1 and FRM Part 2.

Both of the parts are available on the third Saturday of May and the third Saturday of November. Don’t forget you’ll have to pay a registration fee.

There are three types of payments, based on the time of registration: early, standard, and late. The early fee is the lowest, while the late registration costs the most.

You have a chance to take both Parts on the same date. However, your FRM Part 2 is only valid if you have passed FRM Part 1.

Many participants prefer to take the exams separately. Otherwise, you might end up paying for a test that isn’t valid.

Other Things to Note

The FRM Part 1 has about a hundred questions; each of them has equal value. These questions cover topics like financial markets and products, quantitative analysis, and foundations of risk management.

It’s advised to study extensively. Between 2010 and 2017, roughly only 46% of people passed part one of the FRM.

If you pass Part 1, you will have a four-year window to register for FRM Part 2. In the second part of the exam, you will have 80 questions. The topics are more specific and risk management-oriented.

Topics include credit risk measurement and management, risk management and investment management, and operational risk and resiliency. Based on the statistic mentioned above, only 57% passed FRM Part 2.

Once you take part in either of the Parts, you will have to wait six weeks to get the answer if you passed. And the last step to obtain financial risk management certification is to get two years of experience.

Work Experience

Once you passed both Parts of the exam, you will have to get work experience. It has to be fulltime in the area of financial risk management or other related vocations within the field. The working period has to be no less than two years. Internships and part-time jobs will not be accepted.

You will have to send your CV to GARP. In it, you’ll have to explain your finance-related position in at least five sentences.

Be sure to explain the duties and expectations of the position entirely. This description serves as proof that you understand the financial field, and your experience is valid.

Usually, the organization will inform you if you are eligible for certification and will provide you with instructions on how to send them the information. Once certified, you’ll be on the FRM registry.

After passing FRM Part 2, you’ll have five years to obtain the required experience. If you do not work experience, you’ll have to retake both parts of the exam.

If you wish to improve your financial risk management skills further, you can opt for additional training provided by the GARP.

Financial Risk Manager or Chartered Financial Analyst?

If you want to become a financial analyst or if you work with investments and want to further your career, you probably heard two distinct terms: chartered financial analyst or financial risk manager.

GARP presents the FRM. It’ll give you risk management skills in the financial market.

A chartered financial analyst (CFA) gets the necessary qualifications from the CFA Institute.

The CFA accreditation is an international program designed to cover things like financial analysis, investment, portfolio management, derivatives, bonds, and stocks. Professionals recognize CFA as the gold standard.

Both credentials prepare professionals to work with finances and analysis. They each have a set of exams that should be taken one after the other.

FRM has two Parts, while CFA has Level I, Level II, and Level III. It’s possible to have both certifications at the same time.

Keep in mind that FRM only requires you to pass both exam parts and have work experience.

But for the CFA, you need to have a bachelor’s degree or an equivalent. Four years of work experience also is valid. You’ll also have to become a member of the CFA Institute. Membership costs $275.

FRM offers more specialized knowledge than CFA, as the FRM is geared towards managing risks related to market, business, inflation, or other related types.

The CFA has a broader, more generalized range of topics. You’ll learn about portfolio management, quantitative analysis, and more.

Which to Choose?

But how to decide whether the financial risk management certification is what you need, or whether you’re better off picking a different credential?

Well, to answer that question, you have to decide what you want to do as a financial analyst.

The FRM is aimed towards managerial and executive-level positions, where you’ll have to deal with more risk. So, if you wish to become a market risk manager or want to improve as an operational risk manager, the FRM is the right choice.

But if you want to be a consultant, research analyst, or financial adviser, then the CFA is the better credential for you.

Alternatively, you can hold both qualifications. This is never a bad thing. After all, different parts of the financial market often overlap, so having a better overall understanding of investing and risk management will undoubtedly come in handy.

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