What Is Credit Risk Certification?

Credit risk certification is a professional certification awarded by the Risk Management Association (RMA). The credit risk certification is awarded to individuals who have worked in commercial credit and lending or loan review for at least three years and who pass the five-hour, 120-question credit risk certification exam and become active Risk Management Association members.

Key Takeaways

  • You are certified in credit risk analysis by the Risk Management Association (RMA), which includes membership in the association.
  • The RMA defines credit risk as "how a bank measures, manages, and monitors its exposures to achieve a desired return on its capital. Credit risk managers are tasked with making decisions that impact the composition and performance of the loans."
  • Certification in credit risk is a professional certification and not necessarily required to practice credit risk assessment.

How Credit Risk Certification Works

Successful applicants earn the right to use the credit risk certification designation with their names, which can improve job opportunities, professional reputation and pay. Every three years, credit risk certified professionals must complete 45 hours of continuing education to continue using the designation.

The study program to earn the credit risk certification covers seven skill sets:

  • Evaluating a client's industry, market and competitors
  • Assessing management's ability to formulate and execute business and financial strategies
  • Completing accurate, ongoing financial assessments of the client and its credit sponsors
  • Assessing the strength and quality of client's or sponsor's cash flow
  • Evaluating and periodically inspecting collateral
  • Identifying repayment sources and structuring and documenting credit exposure
  • Detecting and working out problem loan

What Is the Risk Management Association?

The Risk Management Association is a not-for-profit, member-driven professional association serving the financial services industry. Its sole purpose is to advance the use of sound risk management principles in the financial services industry.

The Risk Management Association promotes an enterprise approach to risk management that focuses on credit risk, market risk, operational risk, securities lending and regulatory issues.

Founded in 1914, the Risk Management Association was originally called Robert Morris Associates, named after Robert Morris, a signer of the Declaration of Independence. Morris, the principal financier of the Revolutionary War, helped establish the U.S. banking system.

The Risk Management Association has approximately 1,900 institutional members. These include banks of all sizes as well as nonbank financial institutions. In addition, the Association has 18,500 associates. These people are associates of the association who work in member institutions as relationship managers, credit officers, risk managers, and other financial services professionals.

What Is Credit Risk Management?

Risk management is the identification, evaluation and prioritization of risks followed by coordinated and economical application of resources to minimize, monitor and control the probability or impact of unfortunate events or to maximize the realization of opportunities. Risk management’s objective is to assure uncertainty does not deflect the endeavor from the business goals.

The definition of credit risk management given by the RMA is: "how a bank measures, manages, and monitors its exposures to achieve a desired return on its capital. Credit risk managers are tasked with making decisions that impact the composition and performance of the loans.

Risks can come from various sources, including uncertainty in financial markets, threats from project failures (at any phase in design, development, production or sustainment life-cycles), legal liabilities, credit risk, accidents, natural causes and disasters, deliberate attack from an adversary or events of uncertain or unpredictable root cause.

Strategies to manage threats (uncertainties with negative consequences) typically include avoiding the threat, reducing the negative effect or probability of the threat, transferring all or part of the threat to another party, and even retaining some or all of the potential or actual consequences of a particular threat and the opposites for opportunities (uncertain future states with benefits).