Becoming a Financial Risk Manager


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Using the FRM® to Build your career.
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Becoming a Financial Risk Manager

  1. 1. Becoming a Financial Risk ManagerUsing the FRM® to Build andAdvance Your CareerGlobal Association of Risk ProfessionalsJune 2011
  2. 2. Introductions and Agenda • Moderator • Chris Donohue, Ph.D. • Growth of the risk management • Managing Director, GARP Research profession and Educational Programs • Panelists • Overview of the FRM Program • Prof. René Stulz • Everett D. Reese Chair of Banking • Significance of the FRM designation and Monetary Economics, Ohio State University • What is covered on the FRM Exam • Chairman of the FRM Committee; Member, GARP Board of Trustees • Preparing for the FRM Exam • Michelle McCarthy • Managing Director, Director of Risk Management, Nuveen Investment • Registration Information • Member of the FRM Committee; Member, GARP Board of Trustees • Q&A • Masao Matsuda, Ph.D., FRM®, CAIA • Sample FRM Questions • Owner, Crossgates Investment Management • Bill May • SVP, FRM Program Manager, GARP Research and Educational Programs2
  3. 3. Emergence of the Risk Management Profession• Risk management profession only loosely existed 20 years ago• Drivers of risk management as a profession • Notable risk management failures • Orange County, LTCM, Barings, Société Générale, Credit crisis • Financial innovation • Growth in use and availability of derivatives – 80s and beyond • Risk measurement techniques • Late 80s – early 90s – JP Morgan developed Value Value-at-Risk to quantify expected loss • Computational power • Ability to gather position data and measure risk in a timely manner • Best practice recommendations • Group of 30 report • Regulatory Initiatives • International – Basel I, II, III • National – Sox, Dodd-Frank, FSA, etc.3
  4. 4. Financial Risk Management Skills are in High Demand• Demand for financial risk managers is strong… Source:• And is expected to remain strong… • “Risk Management ranked #14 in the CNN Money and’s 2010 list of top 100 careers with great pay and growth prospects, expecting 10 10-year job growth of 24%.” Source CNN Money4
  5. 5. GARP and the FRMAs the leading professional association for risk managers, GARPsmission is to advance the risk profession through education, trainingand the promotion of best practices globally.• Not-for-profit association, founded in 1996 profit • Over 150,000 members from 195 countries and territories • Governed by Board of Trustees comprised of leading risk executives and researchers • Offices in Jersey City, NJ and London• Financial Risk Manager (FRM) • Leading global professional designation program for risk management • Administered by GARP since 1997 • Program objective — assess an individual’s ability to measure and manage risk in a real-world environment • FRM Committee comprised of senior risk managers and researchers oversee program5
  6. 6. 2011 FRM Committee Dr. René Stulz (Chairman) Everett D. Reese Chair of Banking and Monetary Economics, Ohio State University Rich Apostolik President and Chief Executive Officer, GARP Richard Brandt Risk Oversight, Citibank Juan Carlos Garcia Cespedes Head of Risk Methodologies, BBVA Dr. Chris Donohue Managing Director, Head of GARP Research Center Hervé Geny Global Head of Risk, ICAP Dr. Satyajit Karnik, FRM Fordham University Kai Leifert, FRM Regional CRO, Northern Trust Global Investments Steve Lerit Senior Vice President, Bank of America William May Senior Vice President, GARP Research Center Michelle McCarthy Managing Director, Director of Risk Management, Nuveen Investments Michael B. Miller, FRM Head of Risk Management, Tremblant Capital Group Ezra Uzi Moualem, FRM Vice President, The Financial Institute of Israel & Managing Director, ZRisk Dr. Victor Ng Vice President, Head of Risk Modeling - Firmwide Risk, Goldman Sachs Dr. Elliot Noma Managing Director, Garrett Asset Management Liu Ruixia Deputy General Manager, Risk Management, Industrial and Commercial Bank of China Robert Scanlon Group Chief Credit Officer, Standard Chartered Bank Dr. Til Schuermann Partner, Oliver Wyman Serge Sverdlov Senior Quantitative Manager, Microsoft Corporation Alan Weindorf Treasury, Visa6
  7. 7. The FRM Program Part I Exam (4 hours, 100 MCQ) Voluntary Demonstrate two Certified Continuing years relevant Financial Risk Education work experience Manager (FRM®) Part II Exam 40 hours/2 years (4 hours, 80 MCQ)• Two-part program • Part I curriculum covers the tools used to assess risk • Foundations of Risk Management (20%) • Quantitative Analysis (20%) • Financial Markets and Products (30%) • Valuation and Risk Models (30%) • Part II curriculum focuses on the practical application of those tools • Market Risk Measurement and Management (25%) • Credit Risk Measurement and Management (25%) • Operational and Integrated Risk Management (25%) • Risk Management in Investment Management (15%) • Current Issues in Financial Markets (10%)7
  8. 8. The FRM Exam Process Download Register Sit for Part 1 Sit for Part 2 2011 FRM And Exam Exam Study Guide Prepare • Outlines topics and • Register on GARP • Developed with input • Developed with input readings for Part 1 and website: from FRM Committee, from FRM Committee, Part 2 Exams certified FRMs and certified FRMs and • Developed annually by • Leverage candidate other risk professionals other risk professionals FRM Committee resources, including • 4 Hour exam, 100 • 4 Hour exam, 80 • Insight from Certified practice exams, books, Multiple Choice Multiple Choice FRMs and risk course packs, FRM Questions Questions community training providers • November 19, 2011, • November 19, 2011, (more later) Morning Session Afternoon Session8
  9. 9. Growth of the FRM Program • Average growth of 34% in registered candidates per year since 2000 • 2010 registrations represent over 4,447 firms globally • Exams offered in 92 locations around the world in 2010 • Registrants come from every major financial institution, consulting firm, regulatory body, and academic institution • 100,000th FRM candidate registered for the November 2010 exam Currently, there are over 20,000 Certified FRMs FRM RegistrationsPass RateFull Exam 37.0% 42.9% 54.0% 53.3% 62.7% 58.9% 53.8% 52.5% 44.0% 44.8% 44.4% 42.4% 44.1% Part I 55.2% 52.5% 39.3% Part II 54.0% 54.9% 9
  10. 10. Acceptance of the FRM Program646 organizations have five or more FRM Candidates Top 20 companies with the most FRM Holders• Represent every major banking institution, government regulator, consulting firm and financial services institution around the world• Average annual growth of 30%10
  11. 11. Global Participation in the FRM Program Significant growth throughout the world since 2007 FRM Registration Growth Since 2007 350.0% 300.0% 250.0% 200.0% 150.0% 2010 100.0% 2011 (Projected) 50.0% 0.0%11
  12. 12. Diversity of FRM Candidates Distribution of FRM Candidates – May 2011 Banking Financial Services (non-bank) Academic Risk & Technology Vendors Consulting Insurance Other12
  13. 13. Strengthening the FRM Program• FRM Part I Books with Pearson • Available this month (May 2011)• Global Job Task Analysis • A formal study of the current knowledge, skill and abilities required to perform the job of financial risk manager globally • To validate the appropriateness of the current FRM examination and to guide the design of future FRM program• University Partnerships • Working with universities globally to develop and enhance risk curricula and to directly embed the FRM examination into academic programs• Continuing Professional Education • Launched in late 201013
  14. 14. Value of the FRM Program• Knowledge• Career Enhancement/Advancement • 85% of certified FRMs surveyed responded that they would “certainly/more likely” hire a candidate with the FRM designation over a candidate without the credential • Samples from GARP’s Career Center • Senior Risk Officer • Job Requirement: FRM Certification • Senior Derivatives Analyst • Job Requirement: Progress or completion of CFA and/or FRM a plus • Senior Analyst, Market Risk • Qualifications: CFA/FRM • Director – Risk Ratings • Preferred Qualifications: Professional qualifications (CFA, FRM) a plus• Professional Recognition14
  15. 15. FRM Registration Timeline and Fees Program Enrollment and Exam Registration Fee Part I Part II Program Enrollment Fee (valid for 4 years) USD 300 June 1, 2011 – July 31, 2011 USD 350 USD 350 August 1, 2011 – August 31, 2011 USD 475 USD 475 September 1, 2011 – October 15, 2011 USD 650 USD 650• Enrollment fee includes 1-year complimentary GARP membership year• Candidates can elect to take both Part I and Part II in November • However, candidate must pass Part I to have Part II exam scored• Deferral policy• Questions? Contact frm@garp.com15
  16. 16. November 2011 FRM Exam SitesAfrica Jordan, Amman USA, California, San Francisco Germany, MunichKenya, Nairobi Korea, Seoul USA, Colorado, Denver Iceland, ReykjavikNigeria, Lagos Kuwait, Safat USA, D.C., Washington Ireland, DublinSouth Africa, Cape Town Lebanon, Beirut USA, Florida, Tampa Italy, MilanSouth Africa, Johannesburg Malaysia, Kuala Lumpur USA, Georgia, Atlanta LuxembourgSouth Africa, Vanderbijlpark Oman, Muscat USA, Illinois, Chicago Poland, Warsaw Pakistan, Karachi USA, Louisiana, New Orleans Russian Federation, MoscowAsia Philippines, Manila USA, Massachusetts, Waltham Spain, BarcelonaChina, Beijing Saudi Arabia, Riyadh USA, Michigan, Ann Arbor Spain, MadridChina, Chengdu Singapore USA, New York, New York Sweden, StockholmChina, Guangzhou Taiwan, Taipei USA, NJ, New Brunswick Switzerland, GenevaChina, Hong Kong Thailand, Bangkok USA, North Carolina, Charlotte Switzerland, ZurichChina, Nanjing United Arab Emirates, Dubai USA, Ohio, Columbus The Netherlands, AmsterdamChina, Shanghai USA, Pennsylvania, Philadelphia The Netherlands, UtrechtChina, Wuhan Americas USA, Texas, Dallas Turkey, IstanbulIndia, Bangalore Bermuda, Paget USA, Texas, Houston Ukraine, KievIndia, Calicut, Kerala Brazil, Sao Paulo USA, Washington, Seattle UK, England, LondonIndia, Chennai Canada, BC, Surrey UK, Scotland, EdinburghIndia, Hyderabad Canada, Ontario, Toronto EuropeIndia, Kolkata Canada, Quebec, Montreal Austria, Vienna OceaniaIndia, Mumbai Honduras, Tegucigalpa Belgium, Brussels Australia, MelbourneIndia, New Delhi West Indies, Jamaica Bulgaria, Sofia Australia, SydneyIndonesia, Jakarta Mexico, Mexico City Czech Republic, Prague New Zealand, AucklandIsrael, Tel Aviv (Sunday) Peru, Lima France, ParisJapan, Tokyo USA, California, Los Angeles Germany, Frankfurt16
  17. 17. FRM Candidate Resources• 2011 FRM Study Guide (Free)• 2011 FRM AIMS (Free)• 2011 FRM Practice Exams (Free)• 2011 FRM Part 1 Books ($250 + shipping)• 2011 FRM Part 2 Course Pack ($370 + shipping)• FRM Handbook ($122.50 + shipping)• FRM Training Course Providers• Local Study Groups • GARP Website • GARP Chapters • Social Media: LinkedIn, Facebook17
  18. 18. Q&A• Please enter questions into the text box on the screen and submit18
  19. 19. Q & A – Previously Submitted Questions• How does the FRM compare to other certifications?• How applicable is the FRM to risk management positions outside of banking?• How many hours of prep time is needed to pass the FRM exams? Distribution of FRM Preparation Time - May 2011 20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% < 100 hours 100-150 150-200 250 200-250 250-300 300-350 350-400 400 hours hours hours hours hours hours hours19
  20. 20. Learning More and Connecting with GARP• Learn more about the FRM Program, including Exam preparation resources at: Email:• Connect with other Certified FRMs and FRM Exam candidates at: – search via term “GARP LinkedIn”• Follow GARP on Twitter: @GARP_Risk20
  21. 21. Creating a culture ofrisk awarenessTMGlobal Association ofRisk Professionals111 Town Square PlaceSuite 1215Jersey City, New Jersey 07310USA+ 1 201.719.7210Minster House, 1st Floor42 Mincing LaneLondon EC3R 7AEUK+ 44 (0) 20 7397 9631www.garp.orgAbout GARP | The Global Association of Risk Professionals (GARP) is a not-for-profit global membership organization dedicated to preparing p profit professionals and organizations to makebetter informed risk decisions. Membership represents over 150,000 risk management practitioners and researchers from banks, investment management firms, government agencies,academic institutions, and corporations from more than 195 countries. GARP administers the Financial Risk Manager (FRM®) and the Energy Risk Professional (ERP®) exams;certifications recognized by risk professionals worldwide. GARP also helps advance the role of risk management via comprehens professional education and training for comprehensiveprofessionals of all levels.© 2011 Global Association of Risk Professionals. All rights reserved.