A simple Guide for FRM(Financial Risk Manager certification)

FRM Full form

You are free to use this image on your site, template etc. Just provide us the attribution link

FRM Full form stands for Financial risk manager, a globally recognised professional certification in the risk management industry. It’s awarded by a Global association of risk professionals, popularly known as GARP, which boasts close to 263,000 members worldwide as on 2020

Allen Aravindan,CFA

Risk management careers are often masked with difficult-to-understand nuances, confusing roles & more so lack the suggestion of picking the right qualification.

If you, too, have questions like:

Should I do CFA or FRM?,

How is the CFA and FRM combined?,

what will be the salary FRM in Canada, and India?

should I use the bionic turtle FRM Questions bank

Then this post is for you!

FRM Full form- Financial Risk Manager( Summary)

1: FRM Certification world’s most popular qualification in risk management

2:Doesn’t have any eligibility for registering and writing the exam but part 2 needs to be completed withing 4 years of part 1 exam

3: Scholarship is availble for academic partners listed in the GARP website

4: Pass rates are higher than CFA exam, 46% for part 1 and 63% for Part 2.

5:demands atleast 240 hrs of reading, practicing and performing to clear the exam.

6: candidates on an averager earn C$80,000 In canada

7: Candidates on average earn INR 6 Lacs in Inida

FRM(GARP) Overview

Here is some data which I thought, could throw some light on how exactly it,has gained some linear popularity.

Est YearMember
Comparison of various finance qualfications

Fun Fact

The Qualification was ideated in a pub over a drink by the two friends Marc Lore & Lev Borodovsky, both risk mangament professionals.

The discussion between these two risk managers on the need for a form of recognition or community of risk management led to the birth of this qualification with just 250 members.

Today it, is one of the most popular qualifications spread across 190 countries & Marc Lore is a billionaire business man.

So never underestimate the power of an idea discussed in a pub!

Anyways, moving now to the eligibility!

Who is Eligible For FRM Designation?

The interesting thing about FRM designation is that, unlike CFA, level 1 doesn’t have any pre-eligibility requirements. This means if you are an undergraduate, you can qualify to write the exam. However, the eligibility is for receiving the membership, which would require you to prove

  • 2 Years of relevant work experience
  • Clear the two exams, part 1 and Part 2

This is strictly an optional requirement, which is that members are required to complete CPD(Continued professional development)programs conducted by GARP every two years.

This means that you need to keep studying and answering some basic questions but I haven’t personally attended these in the CFA program either.

How to get the FRM Scholarship

Well! GARP, provides two kinds of scholarship:

1: Students Scholarship: This scholarship is offered in the academic partner program, which means that your institution or college needs to be on the partner list to avail of this. Every year the academic partner(university) can nominate six candidates & One faculty for the scholarship

2:University: More or less the requirement is the same; the university needs to be accredited to GARP.

Unlike the CFA program, which also has direct scholarships availble.

My two cents here! Unless your company or university appears on the list, don’t bother wasting too much time here!

What is the FRM Cost & Exams

Its funny how all the professional qualifications have the same names for the various ways, that we can pay them!

Let me combine the training and exam cost together to give you an easy summary:

May 2295071.25K115086K
Aug 22100075K120090K
Nov 22100075K120090K

Just a heads up here! The november 2022 exam cost is not yet published, however the august 2022 exam cost did see a jump of $50. Hence I assumed that, the next exam cost would be hiked similarly.

May 2255041K75056K
Nov 2255041K75056K

The part 2 exam cost is lower than Part 1, because the enrollement fee $ 400 is only paid once during part 1 registration.

Part 1: 100 questions MCQ Based

Part 2: 80 multiple-choice-based questions

The duration of both exams is four 4 Hrs in total.

What about the training costs?

Budget for around 80 thousand INR for both levels. This means the total cost of pursuing , considering you clear in one go, would be :

1: Minimum: 1.92 Lacs INR ( If registered early)

2: Maximum:2.20 Lacs INR( if registered late)

So its not that extreme, is it? I meant the difference of realising to register early or late.

You can pay for these exams through:

1:Credit card

2: Cheque:( In the case of Indian citizens, you can use the wire transfer method)

However, remember that a wire transfer carries an additional cost of $50, which is close to INR 4000.

So my suggestion is to arrange to pay someone who has a credit card.

How difficult is it?

Truth be told, the exam itself is easier than CFA but the preparation is a little trickier than CFA!

Did that make sense to you?

What I mean to say is, that CFA exams are very crystal clear on their curriculum and there is very little confusion as to what to study.

The exams have the reputation of being a little notorious here, which is why it’s tricky. The pass rates, in my humble opinion, are high!

frm full form

Compare this to CFA, there is a blood bath going on recently. In fact, I have covered the CFA pass rate problem in a different post, do care to check it out in case it interests you?

You can check the entire historical pass rates for the FRM exam here, it won’t be that insightful but still in case you want to settle

How to prepare for FRM designation?

The dreaded discussion is here! How to prepare for this exam?

Just like any other exam, let me structure the preparation on the following foundations

1: Hours spent with the content:

Risk management in the real world is unlike pressing a button! Each step taken can have multiple effects on the overall system. Hence the preparation has to be done in a practical manner and that’s possible only with practice.

But hey! Before that, I would like to bring to your attention on what needs to be studied first!

FRM Part 1Weightage
Foundations of Risk Management20%
Quantitative Analysis20%
Financial Markets30%
Valuation & Risk Models30%

It a very clean coverage, I would say. The exam is clearly over-weighted towards financial markets and valuation-risk models.

And why not? How can we expect to manage risk, when we don’t understand marks and risk models themselves?

On the other hand, we can see the foundation of risk management and quantitative methods are tools to understand risk.

Now that you know what is expected of a young buddying risk manager, let’s leap into the preparation benchmarks

How much time to give in total? 240 Hrs at the minimum, thats the time you need to read the content, but I would recommend dedicating at least 40% more Hrs than that. Why would I say that?

Well, playing safe! Who knows how GARP calculated that 240 hrs? Maybe it’s just a tired executive, who pressed average on a ill drafter survey form taken from tired candidates.

Anyway 40% markup to the recommended 240 Hrs, would be 336 Hrs. Peanuts! You should count yourselves lucky; CFA requires a minimum of 350 hrs. So get on with it!

2: Practice:

This is the fun part! I said fun, not easy. Out of the total of 336 hrs, you should spend at least 40% of it on practice. Which means 134 hrs of practice!

Hence in a given day, if you spend 2 hrs in total preparing for the exam then consider spending 45 mins practising. So only reading is a big no here!

Even if your entire reading is not completed, still open the end of the chapter section and get your hands dirty!

3: Performing:

What’s this? This is a real exam simulation, my friend! You need to consider spending at least 20% of your time performing.

My suggestion here is, dont wait till the end to perform. As you complete one entire section, give a sample mock on it. Trust me! This will go a long way in building your confidence, as well as endurance.

3: Mental and social preperation

Battles are not won alone! You need the team with you to help you sail through this. So you need to set yourself in the correct mindset, before even sitting in the chair and bending your neck to study.

So talk to your boss, your wife, your children, basically any stakeholders in your life. This way when the things become difficult with the preperation itself, you atleast don’t have to worry about the things unrelated to the exam.

4: The Correct reference Study Materials

I know a lot of you, would want me to say bionic turtle or kaplan but I won’t. GARP provides its own reading material, which is validated and relevant, then why take the risk of reffering a derived material?

Please feel free to read the study guide, published by GARP

Salary of FRM in Canda

I will shoot point blank here! Salaries are higher in quant roles, than on credit risk management roles. However quant roles need more skills compared to the credit.

  • An entry level risk analyst would earn C$62966
  • An entry level Quant risk analyst would earn C$77998
  • An entry level Credit risk analyst would earn C$42000

Salary of FRM in India

The trend is somewhat similar here, in terms of the niche!

  • An entry level risk analyst would earn INR 6.19 Lacs
  • An entry level Quant risk analyst would earn INR 8 Lacs
  • An entry level Credit risk analyst would earn iINR 5 Lacs

Is CFA FRM a good Combination?

The combination trap in India! lol. I always find it amusing, how easily we combine things just like an aroma filled curry!

To tell you the truth and nothing but the truth, so help me god!

It Doesn’t make any sense at all to me nor the industry! If you notice,FRM is a risk management and CFA is an asset managent qualification.

I am preety sure that an equity research analyst, will never in his career be expected to model risk and at the same time a risk manager will not be expected to research equities.

So in my humble opinion, this combination is humbug!

CFA Vs FRM: Which to take

This graph preented by 300 hrs on the pass rate of FRM, clearly suggest that the pass rate is obviosly higher than CFA. Now I am not proposing that just because the pass rates are higher, someone should do a course. However, let’s look at it objectively the reality is that there is a whole new world out there, which doesn’t reward you just because you have a good qualification. Mostly that’s the problem with the CFA program, so much work, low pass rates and then finally 90% of the content you dont use beyond CFA level 1.

Hence, atleast with FRM you get to learn a new dimension which is risk and the content is not common accross other qualifications.

YouTube video