It makes complete sense for you to evaluate whether or not pursuing the FRM certification is going to be worthwhile for you. After all, you will roughly be devoting 500 hours in studying, shelling out $1,000 – $1,500 for the fees and a couple of years in obtaining an experience that is relevant to this certification.
Naturally, the worth of this certification, like any other, would be different for different individuals and there is no universal answer to this question.
You can, however, make an informed decision based on your specific situation, which can be categorized as follows –
Currently not working in the field of Risk Management but want to make a career shift?
This is one of the best reasons to opt for the FRM certification. It is possible – your work might not even be remotely related to the management of financial risk. You could be working in IT, for example.
Now, if you want a career transition into financial risk management, you need to first land an interview for a role in risk management and then you can think about clearing it. The first bit is non-personal and you do not get a face-to-face chance to sell yourself to the interviewer.
However, having cleared the FRM exams does tell the company about your seriousness towards the risk management function and blurs the missing ‘appropriate’ background for the field.
Conversely, if you are trying to make a big shift from a fairly unrelated field, there are genuine chances that you might not land the interview. Since the HRs do not spend a lot of time at one CV during the screening process, it is very advantageous to have a stellar certification that catches their eye.
Once you’ve landed the interview, then too, the FRM exam would help you as it makes you highly skilled in managing financial risk.
BUT, clearing the exams does not guarantee a job. You need to have a very good understanding of the subject matter and it is, therefore, highly recommended to study from a practical viewpoint.
Since the FRM readings are revised year after year to keep up with the most relevant practices in the field of risk, it does prepare you better from a practical standpoint too.
Pursuing or done with cfa?
In the finance industry, there is a term called “The Triple Crown”. For those uninitiated, it means having cleared 3 of the most coveted certifications in the field – CFA, FRM & CAIA.
Although you could be a leading top-tier investment management company without having pursued any of these certifications, the chances of doing so increase with more with a crown on your head that speaks about the depth of your knowledge.
It is argued that the CFA curriculum contains all that is needed for investment management. However, its focus revolves more around the generation of returns. The FRM curriculum, however, tells you how you could minimize your risk.
For you to be a better investment manager, you need to effectively balance both these requirements collectively.
Therefore, for those seeking to enter investment management, pursuing FRM along with CFA would be helpful in the long run.
For an in-depth comparison, read CFA vs FRM – a detailed comparison.
Interested in Financial Services at large but not willing to be restricted to the risk management domain?
This is tricky. While in Part 1 of the FRM curriculum, you will learn a great deal about the basics of finance, the Part 2 exam is tailored specifically into applied risk management techniques.
Overall, the final decision in this situation should be based upon where you stand in your career at the moment.
If you are an undergraduate student who is willing to break into the financial services industry, initial progress with the CFA program would be a better option than FRM.
However, if bagging an immediate job is not at the top of your priority list, and you are looking at the big picture, at senior Risk Management roles, having a good understanding of financial risk (even when that is not the main function of your job) shall help you have a wider helicopter view than you normally would and give you an edge over someone who has not pursued the certification.
After all, there has been increasing emphasis on the importance of risk management, especially after the great financial crisis in the previous decade.
Have an MBA degree, are interested in Risk Management, but do not recall what you studied in B-School?
If you are interested in working in financial risk but are not sure that you have the required level of knowledge and expertise to enter and excel, or, are rusty with the risk management that you studied at school, then pursuing the FRM would be a very smart decision to make.
Since the FRM curriculum is revised yearly so as to translate the latest trends and practices of the sector to all candidates, this certification will help you learn from a curriculum that has direct practical applications as well as state-of-the-art knowledge resources to excel in this field.
Not to mention, for the purpose of increasing traction on your resume, it would be a cherry on the top of the cake – that is your MBA degree.
Pursuing CA, and are curious about its synergies with FRM?
Expertise in risk management coupled with advanced knowledge and understanding of financial statements brings about great synergies for risk managers.
Since the FRM is an application-based course, it would broaden the thinking horizon of a CA student. Moreover, most of the senior positions in risk management at top-tier investment banks like Credit Suisse, UBS, et cetera are held by chartered accountants.
To your surprise, too many of them also hold the FRM certification alongside it. Fundamentally, risk management involves an in-depth analysis of the annual reports and financial statements of an enterprise in light of the Basel norms.
Regardless to say that the CA curriculum does give its students an edge in the analysis of financial statements.
Bottom Line
If you are passionate about risk management, you should go for it.
However, it is possible that you do not belong to any of the above mentioned situations. As a thumb rule, if you are working in financial services, then you could always have some indirect benefit.
But in many situations, it might not be worth your time to spend so much time and money towards it – especially if you are desperately looking for a generic entry-level role in finance.
In the long run, however, it makes sense for investment management professionals to pursue it along with the CFA charter.
