What Is a Financial Risk Manager (FRM)?

Financial Risk Manager (FRM) is a professional designation issued by the Global Association of Risk Professionals (GARP). The GARP FRM accreditation is globally recognized as the premier certification for financial risk professionals dealing in financial markets. FRMs possess specialized knowledge in assessing risk and typically work for major banks, insurance companies, accounting firms, regulatory agencies, and asset management firms.

Key Takeaways

  • Financial Risk Managers (FRM) receive accredited by the Global Association of Risk Professionals (GARP).
  • FRMs specialize in assessing risk for major banks, insurance companies, accounting firms, regulatory agencies, and asset management firms.
  • FRM certification requires passing a two-part exam and completing two years of work experience in financial risk management.

Understanding the Role of Financial Risk Managers (FRMs)

An FRM identify threats to assets, earning capacity, or the success of an organization. FRMs may work in financial services, banking, loan origination, trading, or marketing. Many specialize in areas like credit or market risk. FRMs determine risk by analyzing financial markets and the global environment to predict changes or trends. It is the FRM's role to develop strategies to counteract the effects of potential risks.

Financial risk managers (FRMs) are required to be accredited by the Global Association of Risk Professionals (GARP).

To receive the FRM designation, candidates must successfully complete a comprehensive, two-part exam and complete 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. 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.

The Financial Risk Manager (FRM) Program

The FRM Exam covers the application of risk management tools and techniques to the investment management process. 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 tests knowledge of the tools used to assess financial risks, such as quantitative analysis, fundamental risk management concepts, financial markets and products, and risk models. The FRM Exam Part I focuses on the essential tools and concepts required to assess financial risk. Passing the FRM Exam Part I is the first step for an individual to become a Certified FRM.

$127,990

The average annual salary of financial managers and FRMs in 2018, according to the U.S. Bureau of Labor Statistics.

Industry Outlook for Financial Risk Managers (FRMs)

In 2018, the median pay for financial managers including FRMs was $127,990 per year, according to the U.S. Bureau of Labor Statistics. Employment of FRMs is expected to grow much quicker than the average for all occupations at 16% from 2018 to 2028. The Bureau states that "the core functions of financial managers, including risk management and cash management, are expected to be in high demand over the next decade."