15 Essential Details About FRM Part 2

Estimated reading time: 10 minutes



You have passed the first hurdle and are now facing the FRM part 2 examination. Fret not! We discuss some of the details essential to tackling this ugly beast.

This course comprehensively assesses your preparedness to handle various risk scenarios in the financial world. As a result, GARP’s exam is distinctly different from any standard college test that you may have previously come across.

While the FRM Level 1 test will challenge your mathematical mettle, Level 2 will challenge your analytical and critical thinking skills.

You will need to have a broad understanding of risk management concepts to be able to solve this task.


1. What is the complexity of the examination?

Compared to the first part, part 2 tests can be a bit more engaging. In addition, the study materials in Level 2 are more voluminous than those in Level 1 and you will be tested on your current knowledge based on real-world risk factors.

Even candidates with a background in finance often have to dedicate more time to review the study materials.

The coursework is more advanced, expanding on various types of financial risks, analysis and models. Yes, the pressure is on and the exam date is near

Even though many of the Level 2 topics are built upon the subjects in Level 1, there will be new theories and themes in Level 2 as well.

This segment of the Financial Risk Manager program is concept-intensive, especially when it comes to credit risk. Operational risk also has a lot of content for candidates to review.

The exam is also made difficult by the fact that some of the questions can be multi-layered and quite lengthy.


2. How are segments weighted?

GARP examiners strive to test all or most of the concepts in the Part 2 curriculum. Therefore, it takes a balanced study approach to tackle Level 2 successfully. The segment weightings for part 2 are as follows:

  • 20% Market Risk Measurement 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 Financial Markets

Unlike with Level 1, light and fast reading might not be that effective in Level 2. At this stage, GARP will be trying to find out how well you can apply what you have learned in textbooks to real life scenarios.

As such, most candidates find a mismatch between Level 2 exam questions and the content of their study materials.


3. Should I review Level 1 topics before attempting Level 2?

It is essential and highly recommended, but not obligatory. To a great extent, your success in Part 2 will depend on how well you grasped the concepts introduced in Part 1 of the Financial Risk Manager course.

Before you start your Level 2 preparations, it would be beneficial to carry out even a light review of the topics in Level 1. This is especially necessary if you have had a long break between the two examinations.

You need to refresh your memory on overall concepts, but don’t go into the intricate calculations.


4. Which topics are crucial for success?

When you hear of burnout and high stress levels in the program, most of it is associated with poor preparation efforts. As you already know, there are 5 topics in Part 2 of the exam, as opposed to 4 in Part 1. 

Additionally, the other sobering factor is that, as opposed to 100 questions in Part 1, Part 2 only carries 80 questions.

You, therefore, have to read more to answer fewer pinpointed questions. Is there a way to isolate the critical areas to focus on? No, there is no way to know where GARP examiners will stress on in the Level 2 examination.

Try and get versed with all the topics and theories. Preparation, and not guessing, will be your best shot.


5. What are the most challenging concepts?

If you ask past candidates, you probably won’t find that there is always a particular segment that always causes issues.

Your “difficult area” will be unique to you and will be dependent on your educational background and work experience.

The concepts in the course are all advanced, and as such it needs dedication and commitment. As jading as you might find it to be, the course has a fair reward for those that manage to master it.

The right study strategy, therefore, would involve mixing things up so that you don’t read any one subject for an extended period.

Boredom and retention levels are inversely proportional.


6. Which are the most straightforward topics?

Even in the Part 2 exams, candidates may base their hopes on finding some area that will present them with free points. Some believe that Market Risk is an area full of questions that you can ace without much of a struggle.

Others may say it’s Credit Risk. Or is it Current Issues? The list goes on.

  • During your test preparations, you may think that one segment is easy, another is hard.
  • You then start to imagine what GARP will test you on in the exam.
  • Finally, you simply hope that you will be tested on what you studied.

This is a dangerous practice! All topical segments are important and warrant your undivided attention.

On the list of notorious Level 2 topics is Current Issues in financial markets. Relevance of this topic is high, as it aims to update candidates on how current happenings in the financial world can impact risk management.

A good study technique for this topic is peer reviews in study groups and, of course, paying close attention to what is happening in the world of finance in the media.


7. What is the relevance of the Current Issues in Financial Markets?

In Part 2 exam, this area may touch on financial innovations and associated risk issues, flash crash, economic crises, political and sovereign risk issues. 

This segment covers the most pressing problems in the business world and how risk managers can accurately navigate in the resultant environment.

There are several readings entailed in this section by GARP text books and third Party materials. The most important factor to note is that you will be required to demonstrate high analytical skills here.


8. Those numerical questions

A number of the Part 2 questions may be mathematically based, but not as much, compared to Part 1. You can certainly expect theoretical questions to come at you in this phase of the game.

Remember, the exam will test your statistical and analytical skills. You will be required to take the theoretical and apply it to the practical.

Be that as it may, many numerical questions will take you through long theoretical descriptions before the calculations even become necessary.

During exam preparation, it would help to ensure that you get comfortable with all the statistical concepts covered throughout your studies.


9. Do many questions fall outside the study materials?

Financial Risk Management can be a precise endeavor and therefore, a simple rewording can transform the entire meaning of an idea. That is often what happens in the Part 2 of the exam.

After a rigorous review of your Financial Risk Manager study materials, you might find that you were only familiar with a small percentage of the questions after the exam.

The most important thing during exam preparation is, therefore, to obtain knowledge and solidify your understanding of risk management. 

You will then be able to leverage your critical thinking skills to apply the best approach in each question. Pay close attention to the wording to find out the deep meaning within the question.


10. Can I pass the exam in 3 months?

Absolutely yes, but anything less would be detrimental. Because of work, family, and other responsibilities, it is always advisable to start early. 

Three months can be enough, especially if you are comfortable in the areas of risk management as a whole or have your work-background in this area.

GARP’s books are content intensive but they are essential. Also, remember to set aside enough time for mock exams and third party practice questions.


11. What is the best study technique for questions?

The best study strategy should involve going through all the study materials by GARP, before exploring what third party providers have. 

It would be useful to work with a third party provider that knows which of portions of the curriculum are loved by examiners.

Similarly, you will need to mix your study with regular practice questions. Ensure to solve ALL the questions at the end of each segment in GARP’s official textbooks.

You should also explore additional question banks from online providers, like us.


12. What are some good last minute study tips?

Practice Questions! In the last two weeks before your exam date, focus your attention on mock tests and practice questions.

Additionally, be sure to take these tests in an ‘exam like’ atmosphere. After you mark your test, find out your weak areas and spend more time on them.

Go through as many practice questions as you possibly can and leave no stone un-turned.

Selective Reading. As the exam gets closer, many fall into the trap of abandoning their composure.

You might have mastered all the concepts long before the exam day, but in the last days, you will need to keep your brain ‘hot’ for the sake of confidence, speed, and accuracy.

For that reason, it would help to carry out light and selective reading of topics and subtopics without going into details. (Particularly those difficult ones that have caused you issues)

Remember the Big Stuff. The practical-oriented Part 2 test requires you to be able to apply risk concepts to various scenarios.

In that regard, don’t spend your last minutes obsessing about small details.

Focus on the broader concepts.

Study in No Particular Order. Linear thought processes can be constraining to many, but randomizing your learning may expound your thinking.

Because Part 2 will require an outside-the-box kind of thinking, your last minute prep should involve studying out of order.

Your brain will learn to remember things independently and to apply relevant knowledge in random and mixed scenarios. Furthermore, this can actually be a great way to see if you can recall all that you have studied over the course.


13. What should I do with the tough exam questions?

To be the devil’s advocate, as it were, Part 2 questions will rarely be structured as per your expectations. Why would they be? That kind of points to the grey and tricky nature of risk in the financial world, doesn’t it?

The wording, ‘real vs. implied’, and the structure of the sentences in the questions can throw anyone off balance even after comprehensive studying.

Highlight the keywords. Circle or underline the keywords, including words that ring a bell about a particular concept.

The aim of this is to understand the deeper meaning of the question. What are they really trying to get at?

Re-read the question. After marking the keywords, re-read the question to get its whole direction.

After a third reading, you will obtain more clarity and possible ways to answer it.

Rephrase the question in your own words. If you still can’t figure it out, try replacing each word or phrase in the question with your own.

However, be careful not to change the question in the cause of paraphrasing it.


14. What should I do if I experience difficulty with most questions?

Yes, you might be unfamiliar with some questions, but not all will be overly complicated. Understandably, it can be worrying when you struggle with questions back-to-back.

The best advice is to maintain confidence…no matter what. If you start to panic, you will not be able to think clearly.

Here are a few more things to do when in a tough exam:

Take a short break and de-stress. After struggling with more than four questions in consecutive order, your confidence might begin to deflate. Don’t let that happen.

Put down your pencil, close your eyes, and start taking short deep breaths to regain your composure. A relaxed mind is a sharp mind.

Do this for 30 to 45 seconds to regain your composure.

Start with short easy questions: Re-strategize by jumping to a different section of the test.

You only need one easy question to help you break the defeatist attitude. You can then go back to the harder questions later when you are done with the easiest.


15. What should I do with lengthy set questions?

The long and wordy questions will measure your attentiveness to details. It is, therefore, necessary to read the item in detail, paying close attention to every word.

As mentioned before, circle the key phrases to help you properly apply the relevant concepts. After reading the content, read the first question and go back to reviewing the item set as you try to answer the question.

Establish your answer before choosing from the ones provided in the multiple choices. Handle all the subsequent questions in that manner.


In the End

The FRM Part 2 exam is the last step in your pursuit for the globally recognized certification. After you pass this exam, you will only have to get the relevant work experience to obtain the accreditation.

Use the above tips to improve your chances of success and become part of this great network. Once again, we would like to thank you for taking time to read our articles.

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