Details you must know before taking the GARP FRM® exam

Whether you are employed the financial industry or planning on becoming involved in it, chances are you would have heard about the need to pass the Financial Risk Manager Examination (FRM Exam) or the Chartered Financial Analyst Examination (CFA Exam) in order to advance your career.

Various flagship course offerings such as the GARP Financial Risk Manager (GARP FRM®) program as well as the Chartered Financial Analyst (CFA®) program, in addition to other options such as pursuing an MBA or even the Chartered Alternative Investment Analyst (CAIA®) are all worthy contenders for your attention and hard-earned money.

But…which exam path is right for you?

Depending on your career path, you would have done some level of research and have found out about some of the many benefits of becoming a Financial Risk Manager and are planning to sit this exam in short order.

Perfect! Attaining certification by passing the test is a considerably worthy task for any individual who is:

• Working within the financial industry and ready to ascend the corporate ladder
• Ready to enhance their skills and is interested in making a career in finance
• Interested in deepening their knowledge of risk management
• Simply seeking to widen their professional acumen

The specialized governing institution of the program is known as the Global Association of Risk Professionals (GARP®).

It is a not-for-profit establishment that was founded in 1996 on the tenets of further evolving the understanding of risk, its treatment and subsequent risk management.

With almost 200,000 members spanning across almost 200 countries worldwide, the Global Association of Risk Professionals is certainly a force to be reckoned with. And indeed it warrants all the attention it has gained over the years.

As at the ending of 2019, there are almost 40,000 certified FRMs in the various financial sectors around the world.

With an increased global demand for risk professionals, you would be hard-pressed not to find such certified individuals in every major banking firm, insurance company or asset management company operating in today’s modern and turbulent financial climate.

So, what do you need to know about the GARP Financial Risk Manager examinations? Continue reading our comprehensive review to find out!

 

1: This Course is No Stroll in the Park

The latest results revealed by the governing professional body GARP® continues the trend of students facing a test pass-rate in the 40% range.

The fact is, year-after-year, too many persons enter this examination unprepared and are floored by many of the concepts being tested on.

The knowledge of any prospective risk manager will be judged against several areas, including details on:

• The numerically-focused Quantitative Analysis
• Your knowledge of the current financial environment
• Measuring and managing: Credit, Operational and Market risk
• The evaluation of Risk Models

 

2: Creating a Risk Expert

The exam and its certification will be ultimately geared towards creating an elite risk expert who must be able to function far above average when it comes to properly assessing and controlling both current and probable risk scenarios.

On test day, one must anticipate questions that will be structured in a complex manner and drawn from multiple topical sections throughout the entire syllabus.

GARP has purposely made its testing challenging, as these individuals will be charged with the task of creating and enhancing firm value in an ever-increasing stressful environment.

These persons are often deployed in banking institutions and must be able to cope with a workplace that is faced with many different forms of risk.

Whether it is liquidity risk or foreign exchange risk, those assigned must be prepared to answer the call at any time.

 

3: The Worldwide Importance of the Examination

Realizing the importance of controlling risk has historically peaked in times of financial crisis.

Since the 2008 global financial collapse, many financial institutions have, once again, been placing much greater emphasis on being able to properly identify and manage internal risk as well as counter-party risk exposure.

Due to the far-reaching repercussions of facing credit and liquidity risks, demand for risk professionals have significantly gone up and the likelihood of companies needing these individuals for the future is also high.

Whether we focus on the 1980’s loan collapse, the demise of seemingly invincible financial firms such as Lehman Brothers or the dot-com bubble burst of early 2000s, the message is absolutely loud and clear to all…the past experience and future presence of risk is here to stay.

 

4: Associated Costs

GARP fees are considerably lower than that of other well-known and highly acclaimed examinations.

In addition to a one-time enrollment fee of US$400, the 2020 GARP Financial Risk Manager examination fees for a new candidate are as broken down:

• Early Registration Fee: US$425
• Standard Registration Fee: US$550
• Late Registration Fee: US$725

Additionally, whilst a returning candidate will not be charged the US$400 enrollment fee, he or she will be expected to pay the following exam fees depending on time of registration:

• Early Registration Fee: US$350
• Standard Registration Fee: US$475
• Late Registration Fee: US$650

 

Comparatively, for the prospective Chartered Financial Analyst, in addition to a one-time enrollment fee of US$450, current CFA examination fees are as follows:

• CFA Early Registration Fee: US$650 (or 86% higher than the comparable first-time entrance point)
• Standard Registration Fee: US$950 (or 100% higher than the comparable first-time entrance point)
• Late Registration Fee: US$1,380 (or 112% higher than the comparable first-time entrance point)

 

As a point of interest, when compared to costs associated with attaining an MBA from a business school, we truly see the wide discrepancy between the various options:

• NYU Total Tuition Fee: US$140,000
• Northwestern Total Tuition Fee: US$140,000
• UC Berkeley Total Tuition Fee: US$120,000
• UCLA Total Tuition Fee: US$118,000
• University of Texas Total Tuition Fee: $106,000

 

Thus, among the many questions that are typically asked, it is clearly seen that the barrier to entry from an exam cost perspective is significantly favorable towards those wishing to sit the exams.

Additionally, it is noted that the aforementioned costs pertain only for exam registration and do not include additional costs that may arise during the course of study.

 

5: All potential Candidates Must Pass Two Examinations

The format for both Part I and Part II are strictly multiple-choice in administration and are currently only available in English language.

Candidates have the opportunity to sit the tests at two periods each year- on the third Saturday of May and the third Saturday of November (please note that GARP has recently instituted ‘religious alternative days’ for those who are unable to present themselves on a Saturday so be sure to ask about this option should you are having issues with the regular time).

There are currently over 100 test locations scattered around the world and it is certainly a good idea for you to check if a location is offered in your own country.

Of particular interest is the fact that candidates are actually allowed to take the two tests on the exact same day if they desire, however, your Level II paper will only be marked if Level I has been successfully passed.

Additionally, with a non-refundable cost of US$100, all aspirants will be able to defer their examination only once and this deferral must be submitted on-or-before the final day of registration.

 

6: One Hundred Questions Away for Clearing Part I

Part I contains 100 questions (all multiple choices) and these will be geared towards testing your knowledge of the various tools that are used in the financial industry in a bid to assess financial risk.

Part I is always offered in the morning and you will face exam questions surrounding risk models and their valuation, risk within financial markets, quantitative analysis and various concepts within foundations of risk.

Notably, the exam results are “Pass/Fail” and there are no given penalties for having incorrect answers.

Examination results are emailed approximately six weeks after the exam date.

The respective test sections are weighed as follows:

• Foundations of Risk Management: 20% weight
• Quantitative Analysis: 20% weight
• Financial Markets and Products: 30% weight
• Valuation and Risk Models: 30% weight

 

7: Eighty Questions Away for Clearing Part II

Part II contains 80 questions (again, all multiple choices) however this set of questionings will shift the attention towards the application of the aforementioned tools that you would have learned in Part I.

The exam for this last round is always offered in the afternoon and you will be required to master topics on: Market Risk, Credit Risk, Operational & Integrated Risk and to know about up-to-date issues that are being faced in the financial environment.

Once again, there are no penalties for incorrect answers and the results, which are emailed approximately six weeks after the exam date, are simply “Pass/Fail”. The given weights are as follows:

• Market Risk Measurement and Management: 20% weight
• Credit Risk Measurement and Management: 20% weight
• Operational Risk and Resiliency: 20% weight
• Liquidity and Treasury Risk Measurement: 15% weight
• Risk Management and Investment Management: 15% weight
• Current Issues in Financial Markets: 10% weight

 

8: Eight Exam Hours Away from Clearing the Hurdle

Although Part II of the test has 20 fewer questions to tackle (that is, 100 questions in Part I and 80 questions on Part II), both examinations are four (4) hours long.

This means, on a simple-average basis, you will be spending less than 2 and a half minutes per question in Level I and approximately 3 minutes per question in Level II.

However, one must bear in mind that the scale of difficulty will vary across each question- as a result, there will be some questions that will require less than the average and other will undoubtedly require more time than the average.

Whatever the situation, please bear in mind the amount of time that you spend in solving each question- if a particular set is giving you more problems than you can bear. Give it your best estimate and move on!

Of interest, the historical examination schedule normally follows the following trend:

 

Level I: Always administered in the morning on third Saturday of May or November

7:00 a.m.              GARP Officials Start Candidate Check-in process

7:45 a.m.              Exam Officiate Signals Closing of Doors

7:45 a.m.              Handing out of Question Papers

7:50 a.m.              Exam Officials Read Instructions to Candidates

8:00 a.m.             Official Start of GARP Financial Risk Manager Examination

9:00 a.m.             Timestamp Announcement (Three Hours Left for Exam Completion)

10:00 a.m.           Timestamp Announcement (Two Hours Left for Exam Completion)

11:00 a.m.           Timestamp Announcement (One Hour Left for Exam Completion)

11:30 a.m.           Timestamp Announcement (Thirty Minutes Left for Exam Completion)

11:30 a.m.           Announcement of Candidates not being Able to Leave until Official End

11:55 a.m.           Timestamp Announcement (Five Minutes Left for Exam Completion)

12:00 p.m.           Official End of Examination

12:01 p.m.           All Examination Papers are Collected

12:02 p.m.           All Financial Risk Manager Test Candidates are Asked to Leave Exam Room Quietly

 

Level II: Always administered in the afternoon on third Saturday of May or November

1:00 p.m.             GARP Exam Officials Start Candidate Check-in process

1:45 p.m.             Exam Officiate Signals Closing of Doors

1:45 p.m.             Handing out of Question Papers

1:50 p.m.             Exam Officials Read Instructions to Candidates

2:00 p.m.             Official Start of Examination

3:00 p.m.             Timestamp Announcement (Three Hours Left for Exam Completion)

4:00 p.m.             Timestamp Announcement (Two Hours Left for Exam Completion)

5:00 p.m.             Timestamp Announcement (One Hour Left for Exam Completion)

5:30 p.m.             Timestamp Announcement (Thirty Minutes Left for Exam Completion)

5:30 p.m.             Announcement of Candidates not being Able to Leave until Official End

5:55 p.m.             Timestamp Announcement (Five Minutes Left for Exam Completion)

6:00 p.m.             Official End of GARP Financial Risk Manager Examination

6:01 p.m.             All Examination Papers are Collected

6:02 p.m.             All Test Candidates are Asked to Leave Exam Room Quietly

 

9: Securing the Designation

Unlike many other programs, earning the FRM designation is actually a bit more involved than simply passing both exams.

In addition to overcoming both exam sittings and submitting your application to become certified, each prospective candidate must demonstrate to the governing GARP® body that they have at least two (2) years of work experience that is considered to be relevant to the profession.

Also you would want to be actively participating in the voluntary Continuing Professional Development (CDP) program by contributing at least 40 hours of service every 24 months.

The Global Association of Risk Professionals has always prided themselves on these particular requirements, so do not forget these crucial steps!

 

10: Comparable Degree Levels

An independent study conducted by the UK National Recognition Information Centre (NARIC) was surmised that the Financial Risk Manager exam is considered comparable to a Master’s Degree in several regional and national educational systems.

The respective country and comparable Degree Level are as given by NARIC:

 

Country & Comparable Degree Level

• United States:-   American master’s degree standard
• Canada:-    Ontario Qualifications Framework Level 12
• United Kingdom:-    Regulated Qualifications Framework Level 7
• European Union:-   European Qualifications Framework Level 7
• Hong Kong:-   Hong Kong Qualifications Framework Level 6
• Taiwan:-   Taiwanese master’s degree standard
• Singapore:-   Singaporean master’s degree standard
• Australia:-   Australian Qualifications Framework Level 9
• India:-   National Qualifications Framework Level 9
• South Africa:-   National Qualifications Framework Level 9

 

11: Historical Part I Pass Rates

Level I Pass rates since 2013 have been as follows:

• 2013 May: 46% / November: 51%
• 2014 May: 42% / November: 49%
• 2015 May: 43% / November: 49%
• 2016 May: 45% / November: 45%
• 2017 May: 42% / November: 42%
• 2018 May: 41% / November: TBA

 

12: Historical Part II Pass Rates

Level II Pass rates since 2013 have been as follows:

• 2013 May: 57% / November: 58%
• 2014 May: 58% / November: 59%
• 2015 May: 52% / November: 62%
• 2016 May: 50% / November: 54%
• 2017 May: 54% / November: 52%
• 2018 May: 53% / November: TBA

 

13: Preparation through Learning Objectives

There are several key study materials that are necessary for all candidates to familiarize themselves with to ensure exam success.

• The first key volume is the Learning Objectives book offered by the governing GARP® body. This book contains a rather comprehensive overview of what is necessary for exam readiness. Within this guide, students will be exposed to the individual curriculum readings necessary for each highlighted domain and the approximate respective weightings for each segment, among other things.
• The governing body will also provide an official study guide, outlining the key topics that all students must familiarize themselves with.
• It is noted that the curriculum is revised each and every year in order to ensure relevancy and meaningfulness of this risk content. Having an annual refresh of content also ensures that candidates and graduates remain at the forefront of globally accepted risk practices. The study guide will also benefit from the provision of a separate booklet, outlining what changes were made from prior year.
• Of course, students will also need the GARP Part I and II books that will contain all the relevant focus areas one is expected to master.
• As at the end of 2018, each of these books will cost U$300 plus shipping expense.
• As a relatively new addition, GARP Exam e-Books will also be available for both Part I and Part II. These digital books are considered to be quite helpful, particularly for those persons living with extraordinarily demanding schedules.
• Ending 2018, these e-books carry a cost of US$250. It has to be noted that these digital formats are naturally non-refundable in nature.
• GARP, through their website, will also make practice exam questions available for both Part I and Part II. Though limited in the amount of questions, these books are still of vital importance to any individual seeking to achieve the coveted FRM designation
• Lastly, we would also like to highlight the availability of highly customized examination questions on our own website.
• We firmly believe that all candidates will be significantly better off what they expose themselves to a wide variety of sample questions leading up to the actual exam paper and being knowledgeable about common mistakes that are typically made in the program.

 

14: How Many Hours of Studying to Pass the Test?

This topic is indeed a tricky one. It should be abundantly clear that no two individuals are alike and, as such, the learning curve of each will be totally different.

On one end of the scale- there are individuals who are seasoned professionals already working within the industry, and for them to surpass the Financial Risk Manager test, study time may be approximately 200 hours or less depending on what are their functional duties at work.

On the other extreme end of the scale, there is that individual who has no experience working in finance or has just come out of college studying, and things will certainly be different from a study point of view when trying to prepare for the test.

Understanding and internalizing concepts for the Financial Risk Manager exam will take time and consistent effort on a daily basis.

We have seen some students expressing the need to set aside at least 400 hours or more to fully grasp all the necessary information and we encourage you to map out set time periods each day to fully commit yourself in learning the various required Learning Outcomes in the program.

Additionally, after going through the official guides, we urge students to always:

• Practice as many questions they can get your hands on
• Form study groups to discuss those particularly challenging concepts that give you problems
• Communicate with family and friends on your decision to withdraw from too many leisure activities
• Read all available source materials on the world of risk, including the GARP website updates
• Set aside quiet times to study, whether this is early in the morning or late at nights

 

15: Calculators that are Permitted in the Examinations

As prescribed by GARP®, the type of calculators that are allowed to be used in the test are as follows:

• The Texas Instruments BA II Plus
• The Texas Instruments BA II Plus Professional
• The Hewlett Packard 10B II, 10B II+ and 20B
• The HP 12C, 12C Platinum and 12C Anniversary Edition

Be sure to visit the official GARP® website to familiarize yourself with the latest permissible instruments allowed in the exam room.

 

16: Expected Salaries

You will be taking a big step by committing yourself to achieving the designation and, most naturally, you must be interested in finding out about what are the possible financial benefits that one would be able to reap in your career by overcoming the test.

Excluding special company perks and performance bonuses, certified holders may expect to be earning salaries in the range of US$60,000 to US$160,000.

Entry-level analysts may anticipate earning in the US$60,000 range whilst Senior Risk Mangers would be seeking over the US$120,000 mark.

The actual salary will be dependent on various factors such as:

• The number of years of experience
• Possessing additional qualifications that may complement one’s job function
• The actual assigned position of the individual
• The country in which the holder is employed in
• The size of the firm one is employed to
• How rare are certified individuals in the working environment or country

 

17: Official Exam Test Sites

As at November 2018, the official examination Financial Risk Manager test sites dictated by GARP® are as follows:

 

Region: Africa

• Ghana, Accra
• Kenya, Nairobi
• Nigeria, Lekki
• South Africa: Cape Town, Johannesburg

 

Region: Americas

• Brazil, Sao Paulo
• Canada: Calgary AB, Surrey BC, Toronto ON, Montreal QC
• Mexico, Mexico City
• Peru, Lima
• USA: Los Angeles, California, San Francisco, Fort Collins, Washington DC, Tampa Florida, Atlanta Georgia, Chicago  Illinois, New Orleans Louisiana, Boston Massachusetts, Ann Arbor Michigan, Newark, New Jersey, Brooklyn New York, Niagara University New York, Charlotte North Carolina, Cleveland Ohio, Philadelphia Pennsylvania, Houston Texas, Richardson Texas, Seattle Washington
• West Indies, Kingston, Jamaica

 

Region: Asia

• Bahrain, Manama
• China: Beijing, Chengdu, Guangzhou, Hangzhou, Jinan, Nanchang, Nanjing, Shanghai, Shenzhen, Tianjin, Wuhan, Xiamen, Zhengzhou, Zhuhai
• Hong Kong, Hong Kong
• India: Bangalore, Chennai, Tamilnadu, Hyderabad, Telangana, Kolkata, West Bengal, Mumbai, Maharashtra, New Delhi, Pune, Maharashtra
• Indonesia, Jakarta Pusat
• Israel, Tel Aviv
• Japan, Tokyo
• Jordan, Amman
• Korea, Seoul
• Kuwait South Jahra, Kuwait
• Lebanon, Beirut
• Malaysia, Selangor
• Oman, North Azaiba
• Pakistan, Karachi
• Philippines, Manila
• Saudi Arabia, Riyadh
• Singapore, Singapore
• Taiwan, Taipei City
• Thailand, Bangkok
• Turkey, Istanbul
• United Arab Emirates, Dubai
• Vietnam, Hanoi

 

Region: Europe

• Austria, Vienna
• Belgium, Brussels
• Bulgaria, Sofia
• Czech Republic, Prague
• France, Paris
• Germany, Frankfurt
• Germany, Munich
• Ireland, Dublin
• Italy, Milan
• Luxembourg, Luxembourg
• Netherlands, Amsterdam
• Poland, Warsaw
• Portugal, Lisbon
• Russia, Moscow
• Spain, Barcelona
• Spain, Madrid
• Sweden, Stockholm
• Switzerland, Geneva
• Switzerland, Zurich
• United Kingdom, Edinburgh
• United Kingdom, London

 

Region: Oceania

• Australia, Melbourne
• Australia, Sydney
• New Zealand, Auckland

 

Thank you for going through our guide on passing the GARP FRM Examinations. Check out the rest of our dedicated website for much more information as well as our shopping segment for free downloadable content.

 

See you later,

The FRMQB Family