All You Need to Know About the FRM Certification

Where there is a finance enterprise, there is financial risk. Therefore, financial risk management is an essential aspect of running a successful financial firm. It is a skill set that’s in high demand, but what exactly is the financial risk management certification? What does it entail? What kind of careers does it offer? This article tells you everything you need to know, including what it is, the techniques used, what is required, and careers in the field.

What is Financial Risk Management?

Financial risk management is a finance practice that uses financial instruments and data analysis to manage exposure to operational, credit, market, foreign exchange, shape, volatility, liquidity, inflation, business, legal, reputational, sector, and other types of risk. The purpose of this practice is to identify the sources of risk, measure them, and develop plans to address them.

Most major retail, commercial, and investment banks have financial risk management practices or departments. However, as you can imagine, it is not limited to banking. You can find financial risk management at nearly every major asset management firm, hedge fund, consulting firm, and regulator in the world.

In the world of finance, financial risk management is usually applied to four types of risk:

Market Risk

This is the possibility of incurring large losses from adverse changes in financial asset prices, such as stock prices or interest rates.

Credit Risk

This is the risk that borrowers will not repay their debt obligations in full when they are due.

Funding (or liquidity) Risk

This is the risk that a firm cannot obtain the funds necessary to meet its financial obligations, such as short-term loan commitments.

Operational Risk

This is the risk of monetary loss resulting from inadequate or failed internal processes, people, and systems or from external events.

What Are the Requirements for Financial Risk Management?

Here are the requirements for financial risk management, including education, skills, and qualities:

College and Graduate Degrees

A career in this risk field requires a bachelor’s degree, but a graduate degree is preferred, especially an MBA or a doctorate in finance or economics. A Ph.D. in statistics or physics is a viable alternative. Many of those in the field also earn the FRM® designation, a certification offered by the Global Association of Risk Professionals (GARP).

Financial Acumen

Strong financial knowledge is required. Also critical is actual experience working with numbers in a variety of situations, from contract for difference (CFD) trading to translating objective concepts into measurable items.

Analytical and Strategic Mind

Because of all the data involved, anyone who works in the field should be analytical by gathering information, interpreting it, spotting risks and opportunities, and identifying appropriate strategies for managing financial risk.

Technological Capabilities

Anyone in this field should be able to use software and other technological solutions, such as Risk (VaR) to Risk Scenario tools. In addition, it is important to keep up with the latest technological advancements in financial risk management.

Excellent Communication Skills

Those who work in financial risk management must be able to translate complex financial risks, products, and processes into a language the front office, management, and the board can understand. For this to work well, excellent interpersonal and general communication skills are a necessity.

Financial Risk Management Careers

Financial risk management careers are most often found in financial institutions such as banks, financial services companies, brokerages, and asset management firms. However, there are opportunities in other types of business, as well, such as insurance, software, oil and gas, and publishing companies. The following job roles are the most common:

Risk Analyst or Risk Manager

These financial risk professionals use analytical skills and knowledge of international business and currency markets to examine investment portfolios and analyze the risk involved. They project potential losses and recommend ways to limit risk through diversification, currency exchanges, and other investment strategies.

Credit Risk Analyst

These analysts review and assess the financial history of individuals or companies to determine if they are a good candidate for a loan. They evaluate financial data, such as balance sheets and income statements, to determine the level of default risk and calculate financial ratios to help lenders make comparisons.

Market Risk Analyst

These financial risk management practitioners use knowledge of an industry or sector to research market trends and provide companies or investors with a comprehensive market assessment. The company or investor then uses this information to make decisions about investments and future ventures.

Operational Risk Manager

These risk managers investigate how an organization or business is run and identify potential sources of financial, legal, and reputational damage. The goal is to mitigate as much risk as possible and offset financial losses.

Why Consider a Future in Financial Risk Management?

The future is bright in financial risk management. It is a respected profession because financial risk management professionals are critical to the functioning of a business. As a result, the salaries for these positions are promising. According to PayScale , they can be at an average of about AED 244,000 annually. Its popularity as a career is also on the rise. Positions in the field are expected to increase at a rate of 7% over the next decade.


If you are interested in joining hands with a training provider to help make your FRM journey easier, then Kaplan Professional Middle East is here to offer you the expertise of the industry’s leading financial trainers. If you are looking for an FRM training course in Dubai join us as a student to kickstart your FRM exam preparation.