If you want a certification in financial risk management, this post provides exhaustive information on how you can get it, including the education and training you need to have.
Before we look into how to become a financial risk manager and obtain certification, let’s see what the occupation is about:
What is Financial Risk Management?
This entails managing a company’s exposures to risks, including credit risks by employing certain financial instruments.
The risks, which a financial risk manager focuses on include foreign exchange risks, shape risks, volatility risk, liquidity risk, sector risk, and inflation risks.
The manager’s task is to look into such risks, identify them, and make plans to deal with them. He/she deals with the creation of policies for risk takers in an organization to consider when making investments.
When an organization considers the issue of financial risk management seriously, individuals in the risk department may be given positions such as head of market risk management, head of credit risk management, and head of operational risk management.
Educational Requirements to become a Financial Risk Manager (FRM)
Although some organizations employ people with varying educational background into their financial risk management unit, however, some companies pay attention to graduates with a degree related to finance, such as in business, law, economics, and management, with proven experience.
You can begin your career as a financial risk manager by working as an intern after graduating from college.
The most likely option is to join a graduate scheme, and try a number of different roles as an intern to know which one perfectly suites you.
A master’s degree may serve as an advantage; and courses in investment planning, market risk management, investment statistics, credit risk management, and probability may prove to be advantageous.
Other relevant courses that lead to a career in this field include hedging and derivatives, assets securities, and quantitative risk management at a graduate level.
Financial Risk Management Certifications
Having a certification in financial risk management will set you apart and move you ahead up the career ladder to be able to attain positions such as Chief Risk officer, senior risk analysts, Head of operational risk.
Anyone can register to take certification examination in financial risk management. Candidates must pass through two rigorous exams while demonstrating practical experience in risk management.
Continuing Professional Development (CPD) exams are highly encouraged for financial risk managers and renewable on a two year interval.
The exams known as FRM part 1 is usually administered on selected exam days as a four-hour session covering areas on quantitative analysis, financial products, financial markets, and essential risk modelling. You will be required to pay $300 as enrolment fee, while the exam fee of $350.
The FRM Part 2 exam, also a four hour session includes tests on practical implementation and execution of practices such as measurement and management of market, credit and operational risks, and trending issues in the financial market. It has an exam fee of $350.
Financial risk managers also have the opportunity of registering with international organizations affiliated with their chosen career to network with others in the field.
An association known as Global Association of Risk Professionals offers its membership by letting the FRM partake in its examination.
The Professional Risk Managers International Association (PRMIA) also exists to provide Financial Risk Managers with online, flexible training.
Financial Risk Management Training
Several schools and institutions exist to offer courses in financial risk management; they include; The Imperial college London, the University of Leeds, UK, Rotman School of Management at the University of Toronto, Pace University New York.
For a list of institutions offering training in financial risk management, it is important that you consult your local educational service providers.
Financial Risk Manager Duties and Responsibilities
Financial risk management has been on the increase due to the instability of the global market. It should be noted that those in the financial risk department in an organization need to remain independent of those who make the decisions concerning financial risks, so as to forestall a conflict of interest or threats from senior executives who require that their whims be carried out.
Risks managers assess all risk factors that exist in running a business, making certain that a company’s financial limit is not exceeded, and equip the management with a vast knowledge of industrial practices.
Since the financial risk manager will be integral to the success of the business, he/she should possess the ability to prepare and interpret financial statements and be able to use them in business decisions, make comparison between the financial performance of his/her organization and others in like operations; evaluate the viability and possibility of any financial decisions, device and sustain risk reduction plans and even access the ability of the business to bear risk.
Financial Risk Management Skills
The skills you need to succeed as a financial risk manager include proficiency in areas of numeric and risk assessment, relationship building, and communication.
Other qualities you need are flexibility, which is the ability to respond to changing circumstances; as well as an inquisitive mind, and attention to details.
Financial Risk Management Career Opportunities
Opportunities exists for FRM in financial institutions like investment banks, building societies, and insurance companies belonging to both private owners and even the government.
Any institution liable to financial loss can request the services of a financial risk manager.
Financial Risk Manager Salary
The Bureau for Labor Statistics does not have a specific salary range for financial risk managers, but their relevance to financial institutions and unstable financial markets make it possible that they could earn as high as $112,000 annually, depending of course on location and exact job description.