DEFINITION of 'Financial Risk Manager - FRM'

Financial Risk Manager (FRM) refers to a financial designation issued by the Global Association of Risk Professionals (GARP). The FRM designation has global recognition as the premier certificate for financial risk professionals. It is suitable for individuals who want specialized knowledge in assessing risk on behalf of banks, insurance companies, accounting firms, regulatory agencies and asset management firms.

BREAKING DOWN 'Financial Risk Manager - FRM'

To receive the FRM designation, candidates must successfully complete a comprehensive exam that consists of two parts and demonstrate that they have two years of work experience in financial risk management. Professionals who hold the FRM designation can participate in optional continued professional development. The FRM program follows the major strategic disciplines of risk management: market risk, credit risk, operational risk and investment management. Recognized in over 90 countries, the exam is designed to measure a financial risk manager's ability to manage risk in a global environment.

(To learn more about other financial certifications, see: The Alphabet Soup of Financial Certifications.)

Financial Risk Manager Exam

The FRM exam consists of two parts, Part I and Part II. In Part I, candidates must answer 100 multiple-choice questions within four hours or less. This section of the exam tests knowledge on the tools used to assess financial risks, such as quantitative analysis, fundamental risk management concepts, financial markets and products, and risk models.

Part II of the exam requires candidates to complete 80 multiple-choice questions within four hours. This section of the exam requires candidates to apply Part I knowledge to market, credit, operational and integrated risk management; it also examines topical risk management issues. Both exams are held in May and November each year at over 100 different global locations.

To prepare for the FRM exam, GARP releases a study guide, a four-volume book/e-book set and access to practice exams. Candidates receive a pass or fail result that is typically emailed six weeks after the exam. The FRM Committee determine the passing scores. Candidates also receive quartile results that allow them to compare their results to other candidates. Statistics show that Part I of the FRM exam is more difficult, with an average pass rate of 45.4% between 2012 and 2016. Conversely, the pass rate for Part II of the exam over the same period is 56.31%.

Financial Risk Manager Fees

The FRM fee to sit Part I of the exam in 2018 is $750 for candidates who enroll between Dec. 1, 2017, and Jan. 31, 2018, and $875 for candidates who register between Feb. 1, 2018, and Feb. 28, 2018. Candidates who enroll between March 1, 2018, and April 15, 2018, pay an enrollment fee of $1,050.

Fees to sit Part II of the FRM exam are $350 for candidates who enroll between Dec. 1, 2017, and Jan. 31, 2018; $475 for candidates who enroll between Feb. 1, 2018 and Feb. 28, 2018; and $650 for candidates who register between March 1, 2018, and April 15, 2018.


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