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FRM

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The Financial Risk Manager ® (FRM) is a leading certification in the field of risk management awarded by the Global Association of Risk Professionals (GARP), USA. With ever-increasing competition in the job markets, it is all-the-more crucial for professionals to exhibit that their knowledge and skills correspond to the international standards. Earning the FRM certification helps a risk manager prove such value to his/her employer.

Scope:

The curriculum entails a specialized knowledge of risk management techniques, quantitative and qualitative skills that helps a professional to specialize in certain roles.

Typically, the work done by FRMs today include:

  • Managing Market Risk (managing losses that occur due to factors that affect the overall financial markets, e.g. change in interest rates, recession, natural calamities, etc.)
  • Managing Credit Risk (managing the risk of default or delay in the repayment of borrowed funds – this is significant primarily in the banking companies)
  • Recognizing threats to an organization and taking steps to minimize them
  • Estimating the quantum of risk being faced by a company
  • Making relevant recommendations to the management to minimize the risk

Based on a survey, only 50% of the total tasks of FRMs is spent managing the various risk.

Moreover, as the case is in most jobs, as the experience level increases, the role sees a gradual shift from performing risk managing tasks to managing people who perform such tasks.

The FRM certification helps to build certain skillsets among the professionals who take up this course. Skillsets which are common to most certified Financial Risk Managers are:

  • Research & Strategy : FRMs are known for appreciating lessons learned from the historical financial situations whilst also assessing the current fundamentals and use their quantitative and qualitative techniques to deliver forward-looking insights.
  • Trading : In the field of trading of securities, an FRM is able to look beyond the face value performance of a security or a portfolio. By penalizing securities having excessive risk exposures, an FRM can maximize the return earned per unit of risk. Given an overall risk appetite of the portfolio, the trader then can allocate the risk to more efficient alternatives, which earn a higher return per unit of risk taken.
  • Model Building & Valuation : They also exhibit an understanding of specific limitations faced by various risk models and assure to validate any model that is in use for the purpose of effective risk management.
  • Product Management : FRMs are also equipped to identify and manage risks associated with the product being offered by the company. These may include the risk of uncertainty regarding the demand for the product, productions costs overruns, loss of sales to competitors stemming from testing, production, or shipping delays. Unless managed, such risks may adversely impact the financial performance of an enterprise.
  • Portfolio Management : FRMs use a risk-aware framework when they evaluate the financial performance of a portfolio in which they make use both of their technical and strategic know-how.

Risk managers may also add value to most organizations by working in certain functions such as – Audit, Treasury, Regulatory Compliance, Accounting & Control. They could consult clients by providing them insights on their risk appetite and help them maximize their returns on a risk-adjusted basis.

Employers:

Naturally, the need for risk management would be very rare in a manufacturing company, for instance. The major demand for risk management professionals stems mostly from the banking industry (ICICI bank, J.P. Morgan, etc.), insurance industry, credit rating agencies (Moody’s, CRISIL, etc.) and certain financial institutions (organizations that deal with huge amounts of money – hedge funds, investment banks, etc.). However, companies in the energy, as well as the IT sector also deal with various types of risk and therefore have a need for a risk management function. The following snapshots include some of the companies and banks that are known for recruiting most of the FRM candidates.

  • Top Companies which recruit FRMs are ICBC, HSBC, Citigroup, KPMG, Deutsche Bank, Credit Suisse, UBS, PWC
  • Top Banks which recruit FRMs are Chinese Construction Bank, JP Morgan Chase, Wells Fargo, Bank of Americe, Banco Santader

Salaries:

The salaries for FRMs differs across countries on account of factors such as cost of living, demand for jobs, etc. Besides, the quantum of pay also varies across different job profiles at which FRMs are majorly employed.

According to the estimates, the average salary of an FRM charter-holder in India is somewhere close to INR 10,00,000 per year. However, this number varies for different job profiles and increases with the level of experience as shown below:

Meanwhile, the overall average salaries for charter-holders in the USA stands at $99,000 per year. A closer look into the specifics for various profiles and experience levels can be seen below:

According to the U.S. Bureau of Labor Statistics, “the core functions of financial managers, including risk management and cash management, are expected to be in high demand over the next decade” which shall bring about some growth in the overall salary levels for FRM charter-holders.

Most of the students who are in their college graduation and want to make a career in finance ask the question of whether they should pursue CFA or FRM or both as a career option.

It is one of the hottest topics during your college days and is a debate that has been there for a long time now. Let’s try to understand each course in detail and then decide as to what suits you the best.

Which is more SUitable?

Firstly I’ll be giving a glimpse into both the courses from a broad perspective.

CFA is the most generic international course in finance, as it covers every topic of finance in absolute detail and it is the most highly recognized and respected course in the field of finance throughout the world. CFA is best suited for students who want to build their career in :

  • Equity Research
  • Investment Banking
  • Mergers & Acquisitions
  • Private Equity
  • Corporate Finance
  • Portfolio Management
  • Financial Advisory

Roles related to equity research, portfolio management is where you research and identify some investments that best suits your client’s interests and manage their money in order to generate returns for them. Investment banking is where you help corporate companies in fund raising, consultation, Merger and Acquisitions, etc.

FRM, on the other hand, is a very niche course that is focused entirely in risk management. FRM also is recognized internationally and is a highly respected course. FRM is conducted by GARP which was founded in the year 1996 and is headquartered in New Jersey U.S.A. FRM is best suited for profiles like :

  • Credit Risk
  • Market Risk
  • Operational Risk
  • Banking and Treasury
  • Quant Trading

All these roles might seem a little scary and confusing to some of you who are a complete newbie in financial markets. To give a brief on these roles related to risk management is where you access and analyze various types of risks and take precautionary measures to avoid risks beyond a certain limit.

Verdict – To sum it all up one should pursue FRM as a career option if he/she is more inclined towards risk management and quants. On the other hand, CFA as a career option should be pursued if one is more inclined towards equity markets. CFA also covers some portion of risk management but is not that deep as FRM is.

Difference between CFA and FRM

CriteriaCFAFRM
EligibilityMust be in the final year or have a bachelor degree/ 4 years of work experience in any fieldNo work experience or educational qualification is required
Exam DetailsLevel – I 240 MCQ Questions Exams held in June & December Level – 2 120 MCQ Questions Exams held only in June Level – 3 10 essay type questions and 60 MCQ Questions Exams held only in JunePart – 1 100 MCQ Questions Exams held in May & November Part – 2  80 MCQ Questions Exams held in May & November
Passing RatesLevel – I     42% Level – 2    45% Level – 3    52%Part 1   43% Part 2   54%
Time taken2-3 Years1 year
Fees$450 Registration Fees (Valid Throughout) $700/$1,000/$1,350 for each level depending on the time of registration$400 Registration fees (Valid for 4 Years) $350/$475/$650 for each Part depending on the time of registration

Which is more Difficult CFA or FRM?

Candidates who have done both CFA & FRM usually state that FRM is comparatively more difficult as the questions in FRM are all application based as there is very little theory in FRM. Although the course structure of CFA is lengthier and takes much more time to prepare. The most common reason candidates say that FRM is more difficult is due to the use of advanced mathematics which is not required in CFA. So, if you are good in mathematics and you are keen on a future related to it, FRM is a better choice for you.

CFA and FRM Subjects

In total CFA has 10 subjects for Level 1 & 2and 7 subjects for Level 3

FRM has a total of 4 subjects for Part 1 & 5 subjects for Part 2 

CFAFRM
Ethical and Professional Standards (Level 1,2,3)Foundations of Risk Management (Part 1)
Quantitative Methods (Level 1,2)Quantitative analysis (Part 1)
Economics (Level 1,2,3)Financial Markets and Products (Part 1)
Financial Reporting and Analysis (Level 1,2)Valuations and Risk Models (Part 1)
Corporate Finance (Level 1,2)Market Risk Measurement and Management (Part 2)
Equity Investments (Level 1,2,3)Credit Risk Measurement and Management (Part 2)
Fixed Income (Level 1,2,3)Operational and integrated Risk Management (Part 2)
Derivatives (Level 1,2,3)Risk Management and Investment Management (Part 2)
Alternative Investments (Level 1,2,3)Current Issues in Financial Markets (Part 2)
Portfolio Management (Level 1,2,3)                                        –

Top few firms that recruit CFA and FRM

  • Deutsche bank
  • Citi Group
  • Goldman Sachs
  • J.P. Morgan Chase
  • Morgan Stanley
  • HDFC Bank
  • ICICI Bank
  • SBI Bank
  • Black Rock
  • Mirae Asset Management
  • Morning Star
  • Nomura
  • CRISIL
  • Care Ratings
  • Bloomberg
    And many more

Average CFA Salary/Package Vs FRM Salary in India

CertificationCFAFRM
Level  1 / Part 13- 4+ Lakhs P.A.3- 4+ Lakhs P.A.
Level  2 / Part 26- 10+ Lakhs P.A.6- 10+ Lakhs P.A.
Level 312+ Lakhs P.A.
Charter Holder12-18+ Lakhs P.A.12-16+ Lakhs P.A.

As you can see on the salary side both the courses are almost similar. Also, note these figures are based on assuming that the candidate is a fresher in the industry.

In a world where education is gaining increasing importance, super-specializations are the way to go. For those in the Finance Industry, FRM is one of the courses that can help you land the right job or get the promotion that’s been evading you! 

In this article we’re going to brief you regarding everything you need to know about the FRM Course, right from its curriculum and fees to the scope and eligibility criteria for its membership. 

What is FRM?

Before we get into the details of the course curriculum, it is better to understand what the course is about, its ultimate objective and who the course is best suited for. 

FRM stands for Financial Risk Manager. The FRM Program is a course offered by the Global Association of Risk Professionals (GARP, USA). This course is designed to help professionals better equip themselves to understand and manage risks faced by businesses which leads to a career specialized in Risk Management.

FRM Course Eligibility:

There is no basic criteria to undertake the FRM Examinations. A student in first year of Graduation is also eligible to appear for the FRM Part 1 exam. However, there are certain criteria to be fulfilled in order to obtain the FRM Certificate. 

In order To be eligible to get certified as a Financial Risk Manager, the following criteria need to be satisfied:

  • You must have cleared Level 1 and 2 of the FRM Program, within 4 years of applying for the Part 1 exam.
  • You must have a Minimum 2 years of relevant work experience in Risk profile, within 5 years of clearing Part 2 exam.

FRM Exam Pattern

The FRM exams (Both Parts) are held twice a year – on the third saturday of May and November. One can appear for both the parts on the same day. However, it is not recommended due to enormity of syllabus. In essence, a candidate can clear both levels of the examination within one year minimum. 

Given below is a table reflecting the exam pattern of the two parts of FRM Examination –

ParticularsFRM Part IFRM Part II
No. of Questions100 MCQs100 MCQs
Duration4 Hours4 Hours
TimingsMorningAfternoon

FRM Course Fees

The Exam Fees depends on the level and as is common with several International Programs, offers a varied fee depending upon the deadline opted for – Early, Standard or Late. When you enroll for Part I exam, you need to pay a one-time enrollment amount of $400, which is not applicable in Part II.

Exam Level Enrollment Fees Early  Standard Late
Part I $400 $425 $550 $725
Part II 0 $350 $475 $650

FRM Curriculum:

The most important feature of any program is its curriculum. We’ve identified the key areas of study covered across the FRM Program.

FRM Part 1 Subjects:

TopicWeightage
Foundations of risk management 20%
Quantitative analysis 20%
Financial markets and products 30%
Valuation and risk models 30%

FRM Part 2 Subjects:

TopicWeightage
Market Risk Management 20%
Credit Risk Management 20%
Operational & Integrated Risk Management 20%
Liquidity and Treasury Risk Measurement and Management 15%
Risk management and investment management 15%
Current issues in financial markets 10%

Job Profiles and salary of FRM Charter :

Any profile that a FRM Charterholder gets into, will involve calculation of risk, some way or the other.

Take an example of a Risk Manager of an Insurance company. The Risk Manager would determine whether or not to extend an insurance cover to a particular asset, person or a business . He uses various quantitative tools to arrive at the decision. The FRM course teaches you such tools to arrive at such decisions.

Upon completion of the certification, regardless of the title given to you, your basic job profile would focus around Risk Analysis, Risk Identification and Risk Management for various investments and projects that you work on. 

  • Job profiles – Risk Analyst, Operation Risk officer, Risk consultant, Portfolio Manger, Credit risk specialists etc.
  • Average Salary – The Salary of FRM Charter depends upon the work experience, Job profile and the recruiter. Average salary of FRM is $99,000 in USA and INR 10,00,000 in India
  • Recruiters – Recruiters Include Investment Banks, Commercial Banks, Insurance companies and consulting firms such as HSBC, CITI, Goldman Sachs, JP Morgan, Allianz etc.

Frequently Asked Questions (FAQs)

What is the salary of FRM Charterholer?

The Salary of FRM Charter depends upon the work experience, Job profile and the recruiter. Average salary of FRM is $99,000 in USA and INR 10,00,000 in India

What are the Job opportunities after FRM?

A FRM Charter can work in Job profiles such as Risk Analyst, Operation Risk officer, Risk consultant, Portfolio Manger, Credit risk specialists etc.

What is the Fees of FRM Exam?

Initial enrollment fees for FRM Exam is $400 . The additional registration fees for Part I is between $425 to $725 and for Part II is between $350 to $650 depending upon the deadline you want to apply in.