FRM Exam

Written by: Nik Ventouris

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FRM Exam

The FRM exam is a two-part exam that you will need to pass in order to receive your FRM designation.

In this article, we dissect the exam’s structure, outline effective study methods, and offer expert tips for passing.

Whether you’re an aspiring student or a current professional, this guide is designed to give you everything you need in order to pass your FRM exam on your first attempt.

What is the FRM Exam

The FRM Exam is your gateway to becoming a certified Financial Risk Manager. Unlike general finance exams, this is a specialized test that assesses your knowledge and skills in financial risk management.

Before diving into the key components of the FRM exam, it’s essential consider the following key aspects:

  • Eligibility: One of the unique aspects of the FRM exam is that it’s open to everyone. Whether you’re a student or already working, you can register for this exam
  • Work Experience Requirement: To get the certification, you’ll also need to prove that you have two years of relevant work experience. This ensures that you do not only have theoretical knowledge but also possess the practical skills needed for risk management
  • Continuous Learning: Once you are certified, you will need to complete 40 hours of Continuing Professional Development (CPD) every two years in order to maintain your designation

The FRM exam not only evaluates your understanding of financial risk management but also serves as a foundation for your future career. This is because — by passing this exam — you’ll prove to employers and peers that you’re competent in assessing and controlling risk, which is extremely valuable in the financial services industry.

Interested in finding out more about this qualification? Check out our in-depth FRM Certification article.

Exam Structure

The exam is twofold and administered separately via computer-based tests.

Candidates have three opportunities to sit the FRM exam(s) each year (i.e., in May, August, and November.).

Content Outline

Part I

Part I of the exam consists of 100 multiple-choice questions. This section delves into the foundational aspects of risk management, covering topics like quantitative analysis and financial markets.

  • Foundations of Risk Management: Understand the basics that every risk manager should know
  • Quantitative Analysis: Math-heavy section focusing on statistical theories and models
  • Financial Markets and Products: Learn about different financial instruments and markets
  • Valuation and Risk Models: Understand how to value financial assets and assess risks

Part II

Part II is a bit shorter but more focused, containing 80 multiple-choice questions. This section is geared towards the practical application of the knowledge and tools acquired in Part I.

  • Market Risk: Focuses on risks associated with market movements
  • Credit Risk: Learn about the risks that come from lending or credit
  • Operational Risk and Resiliency: Concerns the risks and safeguards within operational processes
  • Treasury and Liquidity Risk Management: Understand how to manage cash, funding, and capital
  • Risk Management and Investment Management: Study how to balance risk when making investment decisions
  • Current Issues in Financial Markets: Stay updated with the latest trends and problems in the financial market

Note: When it comes to scoring, the FRM exam is graded on a pass/fail basis and the results are generally emailed about six weeks after the exam date.

Recommended Study Materials

Interested in starting your FRM exam studies? Check out Kaplan’s in-depth study materials.

4.7 out of 5 starsKaplan Schweser

FRM Exam Prep

Whether you pass your FRM exam will inevitably come down to how well you prepare.

Even though the ideal study experience will vary, we’ve provided some general tips and guidelines for you to keep in mind when preparing for your exams.

Recommended Studying Materials

The right studying materials will not only help you grasp the content more deeply but will also keep you informed about the latest industry trends that relate to your exam.

Here’s an example of the types of resources you can use when preparing:

  • Regulatory Documents: These can help you familiarize yourself with the latest regulations that you will need to know for your exam
  • Study Guides: You can use a detailed FRM study guide to ensure you don’t miss any topics while preparing
  • Professional Online Courses: You may find it beneficial to invest in a third-party course, such as one offered by the Securities Institute of America or Kaplan. These are a great way to increase your chances of achieving a passing score on your first attempt

Think of it this way: just as selecting the right tools for a project can set you up for success, choosing the best study materials lays the foundation for acing the exam.

Mock Exams and Sample Questions

Incorporating mock exams into your study plan is essential for a number of reasons. They allow you to get a feel for the real exam and familiarize yourself with the types of questions you will encounter, and ensure that you’re capable of finishing the exam in the required time frame.

Regularly taking mock exams is also great for improving your confidence during the real exam, which can be crucial for preventing unnecessary mistakes.

Exam Day Tips

Finally, we’ve provided a few tips that you should keep in mind during your exam in order to optimize your performance, manage your time efficiently, and navigate complex questions with confidence:

  • Strategize for Ambiguous Questions: When faced with a perplexing question, avoid spending too much time on it. Proceed on to questions you can answer more easily and return back to flagged questions once you’ve completed the rest of the exam
  • Keep Time Management in Focus: Time can elapse rapidly in an exam. Pace yourself appropriately so that you can tackle every question without haste, and make sure to make use of a simple wristwatch to help you monitor the time if allowed
  • Review Key Concepts: As the exam approaches, make sure to go over the essential concepts, rules, and laws relevant to the FRM exam — flashcards and summary sheets might be useful for quick reference
  • Arrive Early and Relaxed: On the day of the exam, plan to be there ahead of time with your ID and materials ready in order to accommodate any unforeseen delays. This will allow you a moment to calm and focus yourself before beginning

Remember that exam-taking can be a skill in itself, so it’s important that you do your best to get as comfortable as possible in advance.

Ready to get started? StateRequirement recommends having a look at Kaplan’s study materials and resources.

4.7 out of 5 starsKaplan Schweser

FRM Exam FAQ

Is CFA or FRM harder?

Both the CFA and FRM exams are challenging but focus on different aspects of finance. CFA covers a broader scope including portfolio management and financial analysis, whereas FRM is specialized in risk management. All in all, how hard you find each designation will come down to your expertise and experience.

What is the FRM exam?

The FRM (Financial Risk Manager) exam is a globally recognized test focused on financial risk management. It is administered by the Global Association of Risk Professionals (GARP), and consists of two parts (for a total of 180 questions) that are meant to evaluate your knowledge of risk assessment and control.

How hard is the FRM exam?

The FRM Exam is considered challenging due to its specialized focus on risk management topics like market risk, credit risk, and operational risk. Having said that, you should be able to pass on your first attempt as long as you use the right study tools and give yourself ample revision time.

Is the FRM recognized in the US?

Yes, the FRM Certification is widely recognized, both in the US and globally. Generally speaking, most financial institutions, risk management firms, and regulatory agencies will value the FRM certification when it comes to risk assessment and management, and it can thus be a great way of boosting your career prospects depending on your niche and sector.

How long does it take to study for the FRM?

This will be different for each individual. Having said that, most candidates spend between 200 and 400 hours studying for each part of the FRM exam. We recommend you start preparing at least six months in advance in order to cover all of the required material and give yourself ample time to review your notes.

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For all related articles, have a look at our Financial Advisor Resources page.