FRM stands for financial risk manager, and the Global Association of Risk Professionals offers this credential (GARP). The FRM is a credential that confirms the holder’s understanding of risk-management concepts. It is recognised in every significant market and is continually in demand by almost all prominent banks and other financial organisations.
Analyzing and factoring risk into financial decisions is part of risk management. Any money that a business spends, invests, delivers, or gets carries the risk that it won’t generate a profit or lose value. These and other risks can be evaluated for their likelihood of leading to negative outcomes using risk management, which can then be used to create a preventative action strategy.
“Risk management allows the risk-taking activities of the financial markets to happen in a healthy way,” says Lori Nitschke, chief marketing officer at GARP. “In addition to protecting organizations from danger, risk managers help business leaders understand the landscape so they can make better decisions.”
In a bank, a loan officer assesses loan applications and analyses applicants’ risk profiles to assess their likelihood of repaying loans. The risk manager enters the picture as the person in charge of determining an organization’s tolerance for risk, i.e., deciding what kinds of loans it is willing to make.
Candidates must pass a two-part exam to get the FRM certification, which emphasises practical experience and covers the key concepts in financial risk, such as: Quantitative Analysis, Valuation & Risk Models, Financial Markets & Products, Credit Risk Measurement & Management.