FRM – Financial Risk Manager
What is a Financial Risk Manager?
The term “Financial Risk Manager” most often refers to individuals recognized by the Global Association of Risk Professionals as having the prerequisite knowledge to analyze and manage risk related to financial instruments.
A Financial Risk Manager is a key component of banking and investment firms who is tasked with evaluating the changes in risk to existing investment assets or strategies and analyzing risk related to prospective investments.
In a sense, the Financial Risk Manager provides a framework for estimating the risk component used in equations that calculate relative return on investment.
In order to become certified as a Financial Risk Manager, candidates must have 2 years or relevant work experience and pass two standardized exams which focus on the areas of quantitative analysis, credit risk, liquidity and treasury risk, operational and integrated risk, and current issues in financial markets.
Financial Risk Managers may become specialized in certain types of financial assets, such bonds, credit default swaps, commodities, or stocks, although specialization is more common at large firms.
Their analyses take into account the volatility of historic asset prices, the behaviors of comparable assets, and macroeconomic events such as elections, disasters, and company acquisitions.
The most common career path for a certified Financial Risk Manager is to work for banks and investment firms who need teams to manager their portfolio’s risk.
Experienced Financial Risk Managers are also capable of becoming the firm’s Chief Investment Officer.