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As a certified Financial Risk Manager, your focus will squarely be on managing various types of financial risk. Risks are coherent in all types of businesses.
Risk-related occurrences can be caused by several elements, such as changing economic conditions, currency fluctuations, government regulations, or natural calamities.
Financial companies will always try to analyze, predict and avert these various forms of risks. As a result, they need specialized risk professionals to mitigate risk impacts and steer the firm towards suitable investment exposures.
Since no industry is immune to threats, there is an ever-increasing demand for qualified FRMs in the industry.
Below, we go through various things you need to know about becoming a professional risk manager.
1. What are the responsibilities?
Having several duties, this individual will communicate risk policies and strategies for an organization. These professionals provide practical solutions for risk models involving credit, market, and operational risk.
Their job also includes ensuring that there are proper internal controls and that risk-analysis measures are working effectively.
Such certified talents are individuals of excellent analytical and quantitative skills. In addition to this, they possess high aptitude levels for applying a wide range of skills in various business processes.
2. Monthly duties
After receiving their designation, some of the responsibilities may include designing and laying down an overall risk management plan for the organization.
This process typically includes an analysis of the impact on the company when risks occur.
These certified experts will also help to analyze current risks and pinpoint potential threats that might affect the company in the future.
Other roles may include:
- Establishing the risk threshold the company can live through
- Preparing insurance and risk management budgets
- Risk reporting
- Creating continuity strategies
- Explaining external risks to stakeholders
- Conducting risk audits
- Keeping records of insurance policies / claims
- Creating risk awareness among staff members in the firm
3. A typical day
This professional has to be well informed in order to anticipate and tackle obstacles for his or her firm. As a result, they typically start their day by skimming through news media for relevant news that may affect their companies’ risk metrics.
After going through the relevant business news, they will respond to pending emails and review their plans for the day. They may then start work on unfinished projects and carry out statistical analyses to quantify and evaluate risks.
Somewhere during the day, the manager will have to attend meetings to report on aspects of the market or credit risks to stakeholders. Their days are also spent compiling reports, tracking and measuring risks using various electronic models.
Additionally, they coordinate with other teams for the necessary documentation. He/she puts in place risk mitigation strategies for various asset types and structures among others.
The prepared manager also needs to set time aside to gain new knowledge and enhance his or her skills as per the latest changes in the industry.
For instance, a new law might affect the risk factors of the organization. Therefore the job demands regular knowledge appraisal.
4. Working hours
The working hours are typically from 9 am to 5 pm, five days each week. However, depending on the nature of the actual job, FRMS can work much more than 40 hours per week.
The working environment is normally indoors and controlled. Additionally, the work schedule is regular, but it can get a little overwhelming at times, requiring the professionals to multi-task.
In a situation where your attention will be needed in more than one area of the job, you will need to give priority to the most pressing issues. You will need to stay focused during the day to manage all the tasks.
That often demands physical and emotional fitness.
5. Reasons why you should become one
Being in this esteemed profession, you will cast a significant impact on your firm and industry. Risk experts are in high demand in many organizations in the finance industry.
The changing global economic conditions demand that businesses be prepared to understand and plan for risks.
These talented risk engineers are the rightly qualified individuals that can steer companies through murky waters.
The typical job is one of the higher paying ones in the sector. You can expect a massive return for the time and resources you spend in earning the qualification.
Aspirants who climb up the ladder to become Directors of Risk Management can expect to take home a hefty paycheck.
As a result, your next step after becoming certified is to become a Senior manager or a Risk Management Director.
High job satisfaction
You will be taking on an interesting job and you will likely be doing different things every single month. You will probably need to work at a client’s site from time to time or to travel and attend stakeholder events.
In the course of all that, you will get to meet and interact with people or varying backgrounds.
These professionals usually have little to complain about when it comes to job satisfaction. Studies show that employees in this field of finance tend to have a job satisfaction rate of over 9 out of 10.
You will rarely see a risk expert suddenly shifting careers or quitting their jobs. For that matter, if you are looking for a career that will help you settle down, the risk management life may be the one you are looking for!
You play an essential role in risk mitigation
If you are looking for a career where your position is indispensable, then this should be on top of your list. You will get a chance to create business strategies that help to keep your business profitable and avert risks that could lead to disasters.
You will have essential tasks of finding those unsound investments that need to be jettisoned and carrying out other activities that are acting as money pits in the firm.
Exposure to competence
The job exposes you to many aspects of the industry that could be of social and economic importance. For starters, you will get to grow your social networks, improve the economic outlook of your company and contribute to steering your economy in a positive direction.
With the skills you use daily on your work, you can easily apply them to your personal life or when you go decide to become an entrepreneur.
6. What is the demand like for this talent?
Ever since the 2008 global crisis, there has been an ever-increasing demand for risk experts across many industries. No business wants to be caught off-guard.
It has been a difficult lesson learned, and now companies want to handle their risk exposure properly.
Because of the limited number of candidates with the right analytical skills and industry regulation exposure, there continues to be a massive demand for certified risk personnel.
The institute for Global Association of Risk Professionals states that enrollment to the program has been growing at a steady rate of 15 % since 2010.
7. What is their impact in the market?
Risk managers will help to maximize the opportunities of a business. And they will do so while finding the appropriate risk appetite for the institution.
Your input can be worth millions in profitability, as you enable your business or company to seize suitable investment exposures.
Your work will be valuable not only to shareholders but also to the company and its employees and the industry in general.
8. Is it easy to pass the examinations?
In a word…no. The pass rate for the exam is typically in the 40% range. The exam usually covers the practical applications of risk management techniques and skills.
The questions are made to be as practical as possible, with case studies set from real world occurrences.
You will need an in-depth knowledge of risk management concepts and understand approaches that are applicable in the real world.
To pass the exam, you need to:
- Familiarize yourself with the exam topics
- Start preparation early enough
- Take part in study groups
- Practice answering many questions
- Keep your composure on the exam day
9. Examination topics
Level 1 carries 100 multiple-choice questions that will focus on critical issues and is weighted as follows:
- 20% – Fundamentals of Risk Management
- 20% – Quantitative Analysis
- 30% – Valuation and Risk Models
- 30% – Financial Markets and Products
Level 2 carries 80 multiple-choice questions from topics weighted as below:
- 20% – Market Risk Analysis and Management
- 20% – Credit Risk Measurement and Management
- 20 % – Operational Risk and Resiliency
- 15% – Liquidity and Treasury Risk Measurement
- 15% – Risk management and Investment Management
- 10% – Current Issues in the Financial Markets
10. How to earn the Certification
To get the designation, you have to pass the two-part exam and show that you have at least two years of relevant work experience in risk management.
You will need to describe to GARP that you have taken up a role in risk management not later than five years after passing the two levels of your exams
There are no degrees or work requirements for taking the exam. This course involves about 150 hours of study.
To increase your chances of attaining the globally acclaimed title, you might need to complete more than 250 hours before sitting for the level 1 and 2 examinations.
Additionally, of paramount importance will be the need to practice as many practice test questions as you possibly can before attempting the examination.
11. Examination fees
On your way to becoming certified , you can expect to pay an enrollment fee of US$300. Additionally, parts 1 and 2 of the program will set you back US$475 and US$875 respectively.
These costings will be significantly higher if you register for the exam during the ‘late period’.
12. Is it a stressful job?
For any job on Wall Street, you will likely spend some sleepless nights over the stresses of the profession.
Careers in finance such as investment banking have long working hours, many responsibilities, and external pressures from stakeholders. But thankfully, they don’t have it the worst.
Research shows that the typical stress level in Risk Management is on the lower end relative to other professions in the industry.
Nevertheless, with ever-increasing scandals in this sector, risk professionals can expect a considerable amount of pressure in their jobs.
Still, in these stressful moments, one can easily pull through with the right physical and emotional health as mentioned earlier.
13. Employment prospects
These professionals have highly specialized skill sets that applies to risk management within the industry. These professionals can work in private banking marketing, trading and several other related services.
After getting your qualifications and joining the network, some of the career roles and job positions you can fill may include:
- Corporate Risk Director
- Chief Risk Officer
- Operational Risk Manager
- Financial Manager
- Risk Qualification Manager
- Investment Risk Director
- Credit Risk Manager
- Risk Analyst
- Enterprise Risk Manager
- Senior Risk Investment Analyst
- Risk Analytics Consultant
14. How much do they earn for their salary?
Such risk professionals generally earn somewhere between US$100,000 and US$250,000 per year. Additionally, apart from salary, you can expect other fringe benefits such as pension, health insurance, and paid vacation.
Directors of Risk Management can earn up to $29,000 more than entry level starters. Important to note however is that these salaries vary from country to country.
The amount you take home also depends on your level of experience and the type of organization. Overall, the point is that you can expect a decent income.
15. Are Chartered Analysts like Risk Managers?
Both of these professionals work in the financial sector. CFA and FRM professionals have an assured pay rise after attaining their respective certifications in these fields.
Both have better chances at career advancement in the industry and beyond, as opposed to non-certified individuals. Charted Analysts and Risk Managers are highly valued individuals in any organization.
They contribute massively to improving the value of the business and profitability.
Both jobs require analytical skills, crucial decision-making skills and shrewdness when it comes to dealing with risks and investment opportunities.
Even though they share similarities, they are two distinct professionals in the sector. While FRMs focus on risk, CFAs will have been exposed to a broader gamut in the investment field.
We hope that we have shed some valuable light on the subject of becoming a Financial Risk Manager and what it entails being one.
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