Understanding FRM: The Complete Guide to Financial Risk Management

Introduction to FRM

Financial risk management (FRM) is the process of identifying, analyzing, and managing various types of financial risks that a company may face. It involves assessing the potential risks and taking measures to mitigate or avoid them, thereby protecting the company’s financial assets and ensuring its long-term sustainability. In this blog post, we will provide you with a complete guide to FRM, its benefits, and how you can become a certified FRM professional.

What is FRM?

FRM is a professional certification offered by the Global Association of Risk Professionals (GARP) that demonstrates your expertise in the field of financial risk management. The certification is globally recognized and highly sought after by employers in the finance industry. It requires passing two exams, FRM Part 1 and Part 2, and fulfilling work experience requirements.

FRM Exam Structure

FRM Part 1 covers the fundamental concepts of risk management, such as quantitative analysis, financial markets and products, and valuation and risk models.
FRM Part 2 focuses on the practical application of these concepts in real-world scenarios, such as risk measurement and management, credit risk, market risk, liquidity risk, and operational risk.

Benefits of FRM

Becoming a certified FRM professional has several benefits, including:

Increased Job Opportunities

Employers in the finance industry value the FRM certification as it demonstrates a candidate’s expertise in risk management. It can open up several job opportunities in various sectors such as banking, insurance, investment management, and consulting.

Higher Earning Potential

FRM professionals earn higher salaries than non-certified professionals due to their specialized knowledge and skills.

Global Recognition

The FRM certification is recognized globally and is highly respected in the finance industry. It can provide you with opportunities to work in different parts of the world and interact with professionals from diverse backgrounds.

Personal Growth and Development

The FRM certification requires you to have a deep understanding of financial risk management concepts, which can help you improve your analytical and decision-making skills. It can also provide you with a sense of accomplishment and boost your confidence.

Becoming an FRM Professional

To become an FRM professional, you need to fulfill the following requirements:

Pass the FRM Exam

The FRM exam consists of two parts, FRM Part 1 and Part 2, and is offered twice a year. You need to pass both exams to become an FRM professional.

Gain Work Experience

You need at least two years of work experience in risk management or a related field to become an FRM professional. However, you can take the exam before fulfilling the work experience requirement and earn the certification after gaining the required experience.

Adhere to the Code of Ethics

As an FRM professional, you need to adhere to the GARP Code of Ethics, which outlines the ethical standards and principles that you should follow in your professional conduct.

Preparing for the FRM Exam

Preparing for the FRM exam requires dedication, commitment, and a structured approach. Here are some tips to help you prepare for the exam:

Start Early

Start preparing for the exam early to give yourself enough time to cover all the topics and practice questions.

Take a Course

Enroll in an FRM preparation course offered by a GARP-approved Exam Prep Provider.
EDGE Education is an approved exam prep provider with GARP. EDGE Education provides in-person and blended exam preparatory trainings for the FRM Part I and Part II examinations.
EDGE Education has been preparing candidates for the FRM examinations since 2013. Our unique discussion-style training approach helps students understand exam concepts better and gain clarity on risk management techniques in a practical real-world setting.
We employ a hands-on approach to training where we cover several MCQ examples and open-ended examples in class to put learned concepts into practice.
Compact class sizes ensure that all students receive individual attention.
Regular in-class assessments ensure that students keep up with their studies & review and commit formulae and important concepts to memory. Assessments also help students improve their test-taking skills increasing their readiness for the exam day.
EDGE also offers live streaming of their classes, thereby allowing students to attend classroom sessions despite a busy schedule and regardless of their present location.
EDGE Education offers 4 hours of one-on-one personal training for FREE to all registered professional course students allowing candidates to clarify doubts and discuss key issues during their study.
EDGE Education supports its registered students with free a WhatsApp Q&A support group, to ensure the candidates remain motivated, feel connected, and always have their queries resolved on time.

Form a Study Group

Forming study groups helps your study journey in the following manner:
Improved Learning: Studying in a group allows you to learn from other members, who may have a different perspective or understanding of the material. This can help you to fill in any gaps in your knowledge and improve your overall understanding of the subject.
Increased Motivation: Studying alone can be challenging, but working with a group of peers can provide you with the support and encouragement you need to stay motivated and focused on your studies.
Time Management: Group members can help each other to stay on track with assignments and deadlines. This can be especially helpful for those who struggle with time management or procrastination.
Enhanced Communication Skills: Participating in a study group can help you develop better communication skills, such as active listening, articulating ideas, and expressing opinions.
Reduced Stress: Working with a group can help reduce the stress of studying, as it provides an opportunity to share the workload and tackle challenges together.
Increased Confidence: Collaborating with others can help build your confidence in your abilities and strengthen your problem-solving skills.

For the above benefits, in-class study and participation is always encouraged.
Join EDGE Education for your FRM exam preparation and benefit from classroom-style group study. Connect with like-minded individuals and study together for a more effective learning experience.

Revise and Take Mock Exams

At the end of your study review a candidate should attempt at least 2 mock exams. Mock exams help candidates to:
Identify Knowledge Gaps: Mock exams can help you identify areas where you need more study and practice, allowing you to focus your efforts on those areas. Build Exam Confidence: Mock exams can help reduce exam anxiety by allowing you to become familiar with the format and type of questions you can expect on the actual exam.

Time Management: Taking mock exams under timed conditions can help you practice managing your time effectively during the actual exam.
Test Strategies: Mock exams provide an opportunity to practice various test-taking strategies, such as the process of elimination, guessing, and pacing. Feedback: Mock exams provide valuable feedback on your performance, highlighting areas where you need to improve and areas where you are doing well.Motivation: Mock exams can be motivating, especially when you see improvement in your scores over time.

As part of their Revision Course, EDGE Education supports candidates with a full-length 4-hour mock exam followed by a 3-hour mock discussion and review. This allows candidates to judge their weaknesses approximately 2 weeks prior to the real exam day. To strengthen their test-taking skills candidates can also make use of the FREE pre-study questions and full-length mock exam provided by GARP.

Seek Help

If you find that you are struggling with a specific study concept, or are finding it hard to get started with your studies or require guidance on how to improve your study efficiency, it is important to reach out for expert help.
At EDGE Education our student advisors will be able to help connect you with a FREE 30-minute personal discussion session with the trainer regardless of whether you are enrolled with EDGE Education as a student or not. This is our way of helping aspiring FRM candidates get on with their studies and achieve their dream of becoming certified FRM.