DEFINITION of 'Professional Risk Manager - PRM '

Professional risk manager is a designation awarded to risk managers by the Professional Risk Managers' International Association. The Professional Risk Managers’ International Association awards the designation to financial risk managers who pass four exams covering financial theory; financial instruments and markets; mathematical foundations of risk measurement; risk management practices; and case studies, best practices, conduct, ethics and bylaws.

BREAKING DOWN 'Professional Risk Manager - PRM '

The study program to become a professional risk manager covers the financial theory behind risk management, risk measurement, option theory, financial instruments, trading markets, best practices and historical risk-management failures. Individuals with the professional risk manager designation may work as enterprise risk managers, operational risk analysts, credit risk managers, risk advisory consultants and more. Types of businesses that hire professional risk managers include insurance companies, asset managers, hedge funds, consulting firms and investment banks.

Testing to Become a Professional Risk Manager

Professional risk manager exams are computer-based, and the questions are all multiple choice. The exams can be taken in any order and must be completed over a period of up to two years; they are offered during four testing windows per year, each of three weeks. The program recognizes other professional designations and gives partial credit to "cross-over" candidates, as well as to graduates of select university programs.

Defining 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 those risks.

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 unpredictable events.

Defining Financial Risk Management

Financial risk management is the practice of using financial instruments to manage exposure to risk: operational risk, credit risk, market risk, foreign exchange risk, shape risk, volatility risk, liquidity risk, inflation risk, business risk, legal risk, reputational risk, sector risk, etc. Like general risk management, financial risk management requires identifying risk sources, measuring them and making plans to address them.

Financial risk management can be qualitative and quantitative. As a specialization of risk management, financial risk management focuses on when and how to use financial instruments to hedge costly exposures to risk.

International banks generally adopt the Basel Accords for tracking, reporting and exposing operational, credit and market risks.

The Professional Risk Managers’ International Association

The Professional Risk Managers’ International Association is a non-profit professional association founded in 2002. It is governed by a board of directors directly elected by its global membership and is represented by 46 chapters in major cities around the world.

RELATED TERMS
  1. Associate in Risk Management (ARM)

    An associate in risk management designation is a nationally recognized ...
  2. Market Risk

    Market risk is the possibility of an investor experiencing losses ...
  3. Risk Profile

    An evaluation of an individual or organization's willingness ...
  4. Risk Discount

    A risk discount refers to a situation where an investor is willing ...
  5. Company Risk

    Company risk is the financial uncertainty faced by an investor ...
  6. Management Risk

    Management risk is the risk associated with ineffective, destructive ...
Related Articles
  1. Personal Finance

    Risk Management Framework (RMF): An Overview

    A company must identify the type of risks it is taking, as well as measure, report on, and set systems in place to manage and limit, those risks.
  2. Tech

    The Importance of Healthcare Risk Management

    Risk management is especially important in healthcare because human lives might be on the line. Here are some strategies to map out a plan.
  3. Investing

    The Risks Associated with Common Investments

    Investing inherently involves some risk. Here are some of the different types of investment risks.
  4. Investing

    Balancing the Different Risks Investors Face

    One of the keys to investing successfully is to balance different types of risk.
  5. Insights

    How to Invest In Developing Markets

    Developing markets can be attractive additions to many investor's portfolios, but carry additional risks that must be considered.
  6. Small Business

    Identifying and managing business risks

    Running a business comes with a lot of associated risks, but there are an equal number of ways to prepare for and manage them to lessen their impact.
  7. Investing

    Using Logic To Examine Risk

    Know your odds before you put your money on the table.
  8. Investing

    Understanding Risk is Key to Your Investing Strategy

    Here's why considering all types of risk is crucial for a successful investment plan.
  9. Managing Wealth

    Top 7 Ways to Manage Business Risks

    Risk management is a form of insurance in itself for small business owners. Here are seven steps to implement a plan.
RELATED FAQS
  1. What are the different sources of business risk?

    Explore the various sources of business risk for companies and learn how critical risk management is to a company's financial ... Read Answer >>
  2. Financial Risk vs Business Risk

    Understand the key differences between a company's financial risk and its business risk – along with some of the factors ... Read Answer >>
  3. What is the difference between risk avoidance and risk reduction?

    Learn what risk avoidance and risk reduction are, what the differences between the two are, and some techniques investors ... Read Answer >>
  4. What Are the Components of a Risk Premium?

    Learn the five main risks that comprise the risk premium and how they affect investors. Read Answer >>
  5. What is liquidity risk?

    Learn how to distinguish between the two broad types of financial liquidity risk: funding liquidity risk and market liquidity ... Read Answer >>
  6. Systemic versus systematic risk: What's the difference?

    Systemic risk generally refers to an event that can trigger a collapse in a certain industry or economy, whereas systematic ... Read Answer >>
Hot Definitions
  1. Return On Equity - ROE

    The profitability returned in direct relation to shareholders' investments is called the return on equity.
  2. Working Capital

    Working capital, also known as net working capital is a measure of a company's liquidity and operational efficiency.
  3. Bond

    A bond is a fixed income investment in which an investor loans money to an entity (corporate or governmental) that borrows ...
  4. Compound Annual Growth Rate - CAGR

    The Compound Annual Growth Rate (CAGR) is the mean annual growth rate of an investment over a specified period of time longer ...
  5. Net Present Value - NPV

    Net Present Value (NPV) is the difference between the present value of cash inflows and the present value of cash outflows ...
  6. Price-Earnings Ratio - P/E Ratio

    The Price-to-Earnings Ratio or P/E ratio is a ratio for valuing a company that measures its current share price relative ...
Trading Center