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From the Classroom to the Boardroom
Are you seeking to advance your career and individual marketability? Well, the FRM vs PRM debate may be one that you are currently going through as a result of that desire to reach higher heights.
Understanding and managing financial risk is the only sure ground organizations have against a shaky future.
The face of financial risk has been rapidly mutating, ever since the global financial crisis of 2008/2009. Today there are threats from new fronts such as technology, geo-politics, and new regulations.
To navigate the risk-laden economic environment, organizations have to bank on highly skilled risk professionals, including both these certificate holders.
For fresh graduates and ambitious professionals in the field of financial risk management, it can be a real dilemma trying to choose between the FRM, PRM and CFA certification programs.
This, as both of these courses are committed to advancing the profession. This post investigates the dichotomy between the two so you can make an informed decision.
Program providers: GARP vs. PRMIA
GARP® is the only official provider of the Financial Risk Manager (FRM®) certification. The Global Association of Risk Professionals is a veteran organization in this field, established in 1996.
The first Financial Risk Management exam by the institution was in 1997. Apart from spearheading proper risk management in the industry through certifications, GARP also sponsors enterprise-targeted training.
They conduct global bench-marking initiatives and forums that bring risk practitioners, regulators, and academia to address crucial risk issues.
PRMIA provides the PRM certification in collaboration with several universities.
The Professional Risk Managers’ International Association is considered the only ‘direct’ rival body to GARP in the industry.
PRIMA was established in 2002, and the first Professional Risk Manager Certification exam was conducted in 2004.
The FRM program mainly directs candidates to acquire a laser-focused, yet in-depth, knowledge for assessing and managing various financial risks.
The program also touches on general practices in the field of financial risk management, including ethics and current issues.
The PRM certification program aims to enhance professionals’ skills in risk assessment and mitigation in the financial world as well.
Whereas the GARP-provided certification tackles both the quantitative and qualitative aspects of risk, PRM mostly focuses on the quantitative nature of risk.
The later plays a crucial role in predictive analysis and helps in the designing of efficient mitigation measures.
In the eligibility arena; for entry into the FRM program, there are no specific academic or work experience requirements.
Even undergraduates in the final year of their course programs are eligible to enroll and sit for the exam.
At the same time, those considering a career switch later in life don’t need a financial or mathematical background to enroll in the course.
However, the PRM certification program has minimum eligibility requirements for candidates wishing to enroll and sit for the exams. The PRM requirements are as follows:
- You must have accomplished a graduate school program, such as an MBA, MSF or MQF, or be a CFA charter holder
- As an alternative to the graduate school and CFA requirements, undergrads with two (2) years of full-time work experience can also register
- The final enrollment option is four years of full-time work experience for those who can’t fulfill the earlier mentioned asks.
- Please note, even after meeting the above enrollment requirements, one must also be a member of PRMIA to sit for the four PRM exams.
The FRM syllabus is considered to be quite comprehensive with respect to risk management. It covers everything from the basics to advanced level risk management.
Part 1 of the course explores the underlying theories and fundamental tools in financial risk management, while Part 2 delves into the main areas of financial risk measurement, control and mitigation.
Part 1 topics include:
- Foundations of Risk Management
- Quantitative Analysis
- Financial Markets and Products
- Valuation and Risk Models
Whereas, part 2 topics include:
- Market Risk Measurement and Management
- Credit Risk Measurement and Management
- Operational Risk and Resiliency
- Liquidity and Treasury Risk Measurement
- Risk Management and Investment Management
- Current Issues in Financial Markets
On the other hand, the PRM certification program syllabus majorly focuses on quantitative approaches to risk.
- PRM level 1: Finance Theory, Financial Instruments, and Markets
- PRM level 2: Mathematical foundations of Risk measurement
- PRM level 3: Market risk, credit risk, and operational risk
- PRM level 4: Case studies, best standards, ethics, and governance
The FRM course comprises a two-part examination; level 1 and level 2. You can sit for both of these exams on the same day, but you must pass part 1 first before level 2 of your test is graded.
For that reason, most candidates prefer to schedule them on separate dates.
The exams occur on May, July, November and December (Part 2 only). Registration starts as early as January.
The Level 1 examination takes place in the morning and level 2 for the afternoon session.
Contrary to its competitor, the PRM program entails four (4) separate examinations and there is no fixed order for its exams.
Candidates can sit for all the PRM exams on the same day or within the same month. You can even take the exams in any order granted you accomplish all of them within two years.
You can sit for the PRM exams in February, March, May, June, August, September or November.
Part 1 of the examination entails 100 questions in the multiple-choice format. This exam takes 4 hours, and occurs in the morning session.
Level 2 involve 80 questions with multiple choice answers as well, and take place in the afternoon session. This must also be completed in 4 hours.
- The PRM part 1 exam entails 36 questions with multiple choice answers and takes 2 hours. It is a written exam, administered in several centers across the word.
- PRM level 2 is taken online. It entails 24 questions in the multiple-choice format, and this test takes 2 hours.
- PRM level 3 is a digital test as well and comprises of 36 questions of multiple choices. This test lasts 1.5 hours.
- PRM level 4, is also taken online. It entails 24 questions with multiple choice answers and lasts for 1 hour.
Historical Pass Rates
GARP re-sits are common. The pass rate of both levels has always been between 40% and 50%.
It will fluctuate within that range each different year, depending on overall candidate performance, especially the top 5 %. The low pass rates speak for the risk manager exam’s difficulty level.
When it comes to the PRM, 60% is the fixed passing score for each of the four exams.
You have many opportunities within four years to retake the FRM exams if you don’t make the 40 percentile passing range. The retake chances are essential, especially since you have to accomplish level 1 to proceed to level 2.
It is noted that you are allowed to retake an exam within the same year of the first attempt. Also, you will only pay the regular exam registration fee.
However, if you plan to retake the exam after the four years have elapsed, you will need to enroll in the program again and start anew.
GARP also stipulates that after successful competition of level 1, you must sit for level 2 within four years to be eligible for the certification.
Similarly, candidates who fail the PRM exam can also ask for a re-sit. You can retake the exam any day three months after your first attempt. You will simply need to buy a new exam voucher to retake the PRM test.
For the FRM program, the course enrollment fee is US$400.
After that you will proceed to pay the individual exam fees that vary according to the time you register as below;
- Early registration US$350
- Standard Registration US$750
- Late registration US$1050
After registration, you will also have to acquire the GARP textbooks, but not necessarily from the institution. Official Part 1 books cost approximately US$300, with part 2 official books costing the same amount.
GARP is also offering digital formats at lower prices.
When it comes to the PRM exam, PRM membership enrollment costs US$150. After your application gets approved, the PRM exam fees are as outlined below:
- PRM Exam Vouchers + Digital PRM Handbook
- US$1,140 (Contributing Members)
- US$1,280 (Affiliates)
Both of these certification courses in financial risk management basically share the same pool of employers.
Top employers in the industry include financial institutions, insurance companies, investment firms, and portfolio management companies. However, the job specifications may slightly differ between these two certifications.
Generally, both certificate holders can fit in a wide range of roles from the first point of contact with risk to managerial and C-suite levels.
Job positions may include:
- Financial Risk Consultant
- Financial Manager
- Corporate Risk Director
- Regulatory Risk Analyst
- Risk Management Analytics Consultant
- Credit Risk Specialist
- Operational Risk Analyst
- Chief Risk Officer
Salary is always a big topic in this argument. Fortunately, the salary scales for both these certificates fall in the same range that is US$80,000 – US$180,000 in the US.
The actual amount you earn depends on your job title, years of experience, and scope of work.
The risk manager course is accepted globally as the chief qualification for risk professionals in the financial world.
Their certification is esteemed as the gold standard, and therefore, many employers like seeing the GARP certification on your portfolio.
GARP has also earned a higher trust with everyone for the many years they have been in operation, as well as for their pro-activeness in other areas apart from offering a certification course.
On the other hand, the PRM certification is relatively new. In doing a job search, you will see very few job posts that specifically ask for the PRM certification.
In the whole discussion, GARP’s course has a more rigorous process for certifying individuals. After passing the examinations, you will need to showcase two (2) years of industry-relevant experience to receive the certification.
The requirement is unlike many other courses and GARP prides itself on having it. Furthermore, the curriculum is updated every year to take into account industry challenges and changes.
The result is that by the time you complete the risk manager course, you will have the skills and knowledge to solve what gives finance employers sleepless nights.
Whereas, PRM requires you to have some amount of work experience in enrolling to the course, it’s not specific as to whether it should be industry-relevant.
After passing the PRM exam, you essentially proceed to get the certification right away. There is also no mention of how regular the PRM curriculum is updated.
The argument rages on. There are several pros to each of taking either of these two certifications over another.
PRM Advantages include:
- PRM tests skew towards quantitative knowledge, and the exam is not that hard to crack
- You can take the online papers anywhere without having to travel to a site location
- You can sit for the PRM tests in any order and any time of the year
- The PRM fee package includes the cost of study materials
FRM Advantages include:
- Tests the in-depth practical knowledge, and the exams are much tougher , something that employers love to hear
- It’s globally recognized and the accepted gold standard in the industry
- GARP has been in existence for a longer time period and has earned industry trust
- There are many approved third party providers to help you in your studies
- The curriculum receives regular updates to maintain a high industry relevance
- You only have to worry about two exams, as opposed to the four examinations in the PRM
Now that you are apprised on the issues, it shouldn’t be hard to choose the right one. (Or, why not just do both?)
Start by listing down your career objectives and then mark them against the goals and pros of each of these two certifications to make the right decision.
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