Although we focus on the CFA charter here at 300 Hours, a lot of our readers are also interested and write in to us about the FRM qualification. And even if you aren’t considering the FRM, it’s always good to know more about other qualifications that you could possibly pursue.
Recently, the Global Association of Risk Professionals (GARP) hosted a webinar where several frequently asked questions by potential and current FRM candidates were discussed by an FRM panel. In this article, I’ll be covering the lessons learned from that discussion, including:
- comparing the FRM to other qualifications such as the CFA charter and the MBA
- discussing the quantitative aspects of FRM and whether this may be an issue
- how bright is the future for risk practitioners and FRM-qualified professionals
Jennifer Voitle, FRM, who also has a CFA charter and an MBA, asserts that the FRM stands out due to its industry-focused approach. She also says that the FRM complements qualifications like the CFA charter very well:
“[The FRM] is practitioner focused, that’s the real difference. For example, the FRM curriculum includes case studies that are drawn from industry practitioners. The people writing the exam questions are a mix of GARP academicians and industry practitioners so you’re learning knowledge that is live and really in use. While the CFA program covers valuable topics such as accounting and so forth, the FRM delves deep in risk management. I still refer to the books, and I keep them in the office and people are always coming up asking to borrow them.”
Richard Morrin, FRM, also makes a point that the FRM gives candidates very specialised knowledge:
“FRM is deeper and more specific than some of the other certifications. You will learn a lot more and it’s not quite as broad across finance, but you still get a broad coverage of risk management, whether it’s operational risk, credit risk or market risk.”
For example, I don’t work directly with operational risk, but I use it in some form or another daily as I have to deal with auditors and other groups across my company. So just getting an understanding of what these different risks are within your organisation helps you in your career.”
William May, GARP SVP and FRM Program Manager, asserts that the FRM isn’t quant-focused, but acknowledges that quantitative skills will help.
“It does have quantitative components to it, but there’s really no way to avoid that. I would say that it’s designed at maybe an advanced undergraduate, early MBA-level of quantitative rigour, but there aren’t any, mathematical-proof-type questions in the exam. But being quantitatively in-tune would probably be helpful in understanding some of the more difficult concepts.
“GARP knows that everyone who is pursuing the FRM is not a former or current math student and the FRM exam isn’t designed to test folks on that. It’s designed to test on concepts, the application of quantitative techniques to risk management situations. So there is a quantitative component to it, but it should be accessible. I would encourage candidates to look through the Study Guide and look through the Learning Objectives to get a feel for the level of mathematical rigour and how it matches to their knowledge base.”
Most FRMs agree that the FRM is quantitatively more challenging than the CFA program. Richard Morrin, who has completed the FRM and CFA programs, is one of them.
“The FRM was a lot more mathematically rigorous compared to any of the other certifications I’ve done. The quantitative skills needed for the FRM would be more than enough for a lot of roles within finance, save for actual quantitative analysts.”
Patrick Reed, who has also completed both the FRM and the CFA program, concurs, but insists that anyone dedicated to risk management should be able to do it.
“Having gone through the CFA and FRM curriculums I will echo what Richard said; it is more difficult. It does go a little bit deeper, but if someone like me can do it, I think anyone who’s dedicated enough and willing to put in the work can do it.
“GARP gives you all the resources you need, and for me, it just came down to repetition and practical application. For example, I would read about a quant concept then would go into work the next day and incorporate it into my work, such as trying to test risk budgeting with it. I used the concepts learned in the FRM program at work wherever possible, and that would really solidify the concepts for me. So, I strongly believe that even if you don’t have a really advanced mathematical background, you can still complete it.”
Most risk experts agree that risk management is growing in importance and recognition, especially in the light of the financial events of the past decade.
“When I started in risk management it didn’t have the recognition or importance that it’s grown to have these days,” Voitle says. “We didn’t do all the model governance and the model validation. I would just develop models and throw them out on the trading desk that same day. So I think that risk management is just growing in importance and rigour and it’s a really good field to enter.”
Reed also agrees with Voitle, and also observes that a risk specialist is currently rare and in demand. “I truly believe it’s a growth business right now. I have a really unique perspective being in St. Louis. We have a pretty decent representation of banks, asset managers, broker-dealers, and investment advisors here, but I’m pretty sure you can count the number of FRMs on two hands if not one, in the entire city. So, I’m seeing a strong demand, not just at my firm, but other firms here, for this sort of specialized knowledge and it’s a limited market.”
Morrin also sees an uptrend in the focus on risk in financial institutions.
“Risk is an area that’s always developing. There are new developments all the time, there are new things being identified, there are new techniques. It is an area that is growing and it’s only going to keep growing. Previously sidelined risk types are coming much more to the forefront, and I can see that that’s only going to continue.”
- Everything You Need to Know About the FRM Exams and GARP
- The Complete Beginner’s Guide to FRM: the Financial Risk Management Qualification
- The Similarities and Differences Between FRM and the CFA Exams, Summarized
- Which Financial Qualification Should You Pick? CFA vs. CAIA, FRM and IMC
- CFA & FRM: How You Can Nail Both Instead of Choosing One
This article is from our coverage on discussions from the GARP Webinar – “How I Became and FRM and Why It Was Worth It”. You can view the full hour-long webinar here.
Are you going to start your FRM journey, or simply just thinking about it? Let us know in the comments below!