After conquering the concepts covered in FRM Part 1, you’re now ready to face the challenging yet rewarding FRM Part 2. As an integral part of the Financial Risk Management certification, FRM Part 2 not only validates your proficiency in risk management but also opens doors to immense career opportunities in the finance sector.
This guide aims to provide all the essential information you need to navigate FRM Part 2 successfully. Let’s Start-
Understanding FRM Part 2 Exam
FRM Part 2 is the second and final examination that you must pass to earn the prestigious Financial Risk Manager (FRM) certification. The certification is offered by the Global Association of Risk Professionals (GARP), a leading professional association for risk managers.
It is designed to test a candidate’s understanding and ability to apply risk management concepts in real-world scenarios. While FRM Part 1 lays the foundation by introducing candidates to the essential concepts and tools of financial risk management, FRM Part 2 builds upon this knowledge by emphasising the application of these tools in various areas of risk management.
This level of the FRM exam is designed to be challenging and is targeted at professionals who are serious about a career in risk management. It ensures that candidates not only have the theoretical knowledge required for the role but also have the practical skills to apply that knowledge.
FRM Part 2 Exam Dates
The Financial Risk Manager (FRM) Part 2 exam is typically offered thrice a year by the Global Association of Risk Professionals (GARP). The exam dates are usually set for May, August and November, following a consistent pattern each year. However, candidates should always check the official GARP website for the most accurate and updated schedule.
Result Declaration Dates
Another critical factor to consider is the result declaration date. Typically, FRM Part 2 exam results are declared about six weeks after the exam date. Keep this in mind when planning your exam schedule as you may want to factor in some time to relax post-exam before jumping back into work or further studies.
FRM Part 2 Registration and Fees
The registration for the FRM Part 2 exam is a straightforward process facilitated through the official GARP website. Prospective candidates can fill out the registration form online, providing necessary details and paying the applicable fees.
Here’s a rough fee breakdown for FRM Part 2. Please refer to the official GARP website for the most current and accurate fees:
|Registration Type||Fee (USD)|
- Early Registration is typically available several months before the exam date and offers the most cost-effective option. It’s advisable to take advantage of this period if you’ve decided to take the exam.
- Standard Registration period follows the early registration period and lasts until about a month before the exam. The cost increases during this tenure.
NOTE – These fees cover the cost of the exam and do not include additional resources like study materials, revision classes, or any supplemental resources you might use during your preparation.
The FRM Part 2 registration fee is non-refundable. Therefore, do ensure that you are fully prepared to take the exam in the chosen exam cycle before paying the fee.
Structure of the FRM Part 2 Exam
The exam comprises 80 multiple-choice questions to be completed within a four-hour duration. Each multiple-choice question typically comes with four possible answers, out of which only one is correct. The questions are designed to test the depth and breadth of a candidate’s knowledge in each area.
Here’s a breakdown of the FRM Part 2 Exam topics and their weightage:
|Topic||Number of Questions|
|Market Risk Measurement and Management||20%|
|Credit Risk Measurement and Management||20%|
|Operational Risk and Resiliency||20%|
|Liquidity and Treasury Risk Measurement and Management||15%|
|Risk Management and Investment Management||15%|
|Current Issues in Financial Markets||10%|
FRM Part 2 Marking Scheme
Let’s have a look at how the answers are graded in FRM Part 2 to arrive at your final score –
- Binary Marking Scheme – For every question, you either get a mark for a correct answer, or you don’t for an incorrect or unanswered one.
- No Negative Marking – You won’t lose marks for incorrect answers. Therefore, it is in your best interest to attempt every question in the paper.
- Equal Weightage – Each question on the exam carries equal weight, regardless of the difficulty or the topic it pertains to. The score you obtain is based on the total number of correct answers you provide.
Here’s a simplified representation of the marking scheme:
|Answer Status||Marks Awarded|
Minimum Passing Score
While the exact passing score for the FRM Part 2 exam isn’t disclosed by GARP, it’s understood that the passing standard is established by the Board of Directors of GARP based on the performance of candidates each year. This means the minimum passing score can vary from one exam to another depending on the difficulty of the exam and the overall performance of the candidates.
Topics Covered in FRM Part 2
The FRM Part 2 exam is designed to assess a candidate’s understanding and application of risk management concepts in different facets of the financial industry. Let’s have a more detailed look at each topic:
- Market Risk Measurement and Management: This area tests your knowledge of market risk types and appropriate measures, as well as modeling techniques. The topics covered include volatility, value at risk (VaR), risk-adjusted performance measures, and more.
- Credit Risk Measurement and Management: Here, the focus is on credit risk in a variety of contexts, including counterparty credit risk, credit exposure, and credit derivatives. You’ll also need to understand the methodologies for evaluating credit risk, like credit scoring and credit VaR.
- Operational Risk and Resiliency: This section explores the various types of operational risks, their impacts, and strategies for managing these risks. Key topics include the Basel requirements for operational risk, loss distribution approach, scenario analysis, and business continuity planning.
- Liquidity and Treasury Risk Measurement and Management: In this area, you’ll dive into the complexities of liquidity risk, including its causes, effects, and management techniques. Topics include funding liquidity risk, market liquidity risk, and the liquidity coverage ratio.
- Risk Management and Investment Management: This section addresses various risk management techniques in the investment management context. Subjects include portfolio construction, risk budgeting, risk monitoring, and risk-adjusted performance measurement.
- Current Issues in Financial Markets: This topic is unique as it changes annually to reflect current events and emerging trends in financial risk management. It ensures that certified FRMs are up-to-date with the latest issues and practices in the industry.
FRM Part 2 Exam Difficulty
The FRM Part 2 exam is widely considered to be a challenging examination. This level of difficulty is primarily due to the breadth and depth of topics covered and the application-oriented nature of the questions.
Let’s break down some of the main challenges contributing to the exam’s difficulty, and how to overcome them –
Volume of Material
The FRM Part 2 syllabus is extensive, covering six broad areas of risk management. Each of these areas requires a deep understanding of various sub-topics.
Overcoming this challenge: Developing a structured study plan can help manage the vast syllabus. Break down your study material into manageable parts and set daily or weekly goals. Regularly track your progress and adjust your plan if necessary.
The FRM Part 2 exam is designed to test your understanding of complex risk management concepts and their practical application. Questions often come in the form of case studies, requiring candidates to apply their knowledge and analytical skills.
Overcoming this challenge: Ensure you fully understand the underlying principles before moving on to new material. Use resources like study guides, textbooks, and online forums to help clarify difficult concepts. Don’t hesitate to seek help from instructors or peers if needed.
The FRM Part 2 exam requires answering 80 questions in four hours. This time constraint can be challenging, especially when dealing with complex case studies or calculations.
Overcoming this challenge: Regular practice with mock exams can improve your speed and accuracy. These practice sessions will also help you get used to the exam format and enhance your time management skills.
Keeping Up with Current Issues
The ‘Current Issues in Financial Markets’ section requires you to stay updated with the latest developments in financial risk management.
Overcoming this challenge: Make it a habit to regularly read financial news, industry reports, and academic papers. This will keep you informed about current trends and emerging issues in risk management.
Balancing Preparation with Other Responsibilities
Many FRM candidates are working professionals and may find it challenging to balance exam preparation with their work and personal responsibilities.
Overcoming this challenge: Good time management is crucial. Try to set aside specific time slots for studying and stick to them as much as possible. Also, consider using any available downtime effectively, like studying during commutes or lunch breaks.
Key Takeaway – while the FRM Part 2 exam is indeed challenging, its difficulty should not be seen as a deterrent. Instead, it reinforces the value and credibility of the FRM certification. With a strategic study plan, a deep understanding of the concepts, and consistent practice, candidates can successfully navigate this exam and earn their certification.
Preparation Tips for FRM Part 2
Preparing for the FRM Part 2 exam can seem daunting due to its broad syllabus and challenging nature. However, with the right strategy and consistent effort, you can effectively tackle the exam. Here are some preparation tips:
- Understand the Exam Structure: Start by familiarizing yourself with the exam structure and the marking scheme. Understanding the distribution of questions across different topics can help you devise a balanced study plan.
- Detailed Study Plan: Create a comprehensive study plan covering all topics in the syllabus. Allocate time based on the difficulty level and weightage of each topic.
- Use Official Study Materials: GARP provides an official study guide and a list of readings for each part of the FRM exam. These materials are designed to cover all topics in the exam and should be your primary study resources.
- Practice with Mock Exams: Mock exams are crucial for understanding the exam format, improving time management skills, and identifying weak areas. Complete as many mock exams as possible in a timed setting to simulate the actual exam conditions.
- Understand, Don’t Memorize: The FRM Part 2 exam tests your understanding of concepts and their application. Focus on understanding the underlying principles instead of rote memorization.
- Join Study Groups: Joining a study group or an online forum can be beneficial for discussing complex concepts, sharing study strategies, and staying motivated.
- Review and Revise: Regularly review and revise the topics you’ve studied to reinforce your understanding and retention.
- Take Care of Your Health: Lastly, remember that a healthy mind resides in a healthy body. Maintain a balanced diet, get regular exercise, and ensure you get plenty of sleep.
You might also like: How to prepare for FRM Part 2 Exam? Tried and Tested Strategy!
What after Passing FRM Part 2?
Passing the FRM Part 2 exam and obtaining the FRM certification can open a myriad of opportunities and benefits for financial professionals. Let’s delve into the specific benefits:
- Global Recognition: The FRM certification is globally recognized and respected. This designation signals to employers that you possess the knowledge and skills needed to manage risk effectively in a wide range of organizations and settings.
- Enhanced Knowledge and Skills: The FRM Part 2 exam deepens your knowledge of risk management principles and practices. It also enhances your skills in identifying, analyzing, and managing risks in real-world financial situations.
- Career Advancement: The FRM certification can accelerate your career growth in the field of risk management, investment banking, risk consulting and more. FRMs often hold senior roles in risk management, including Chief Risk Officer (CRO) and Risk Manager.
- Competitive Advantage: In a competitive job market, the FRM certification can differentiate you from other candidates. It shows that you’re dedicated to your professional growth and have the expertise to manage complex risk-related challenges.
- Networking Opportunities: As an FRM, you become a part of a global network of risk management professionals. This can provide valuable networking opportunities and exposure to best practices in risk management worldwide.
- Higher Earning Potential: According to various surveys, certified FRMs often command higher salaries compared to their non-certified counterparts. This is indicative of the value that organizations place on FRM-certified professionals.
You might want to read: FRM Jobs in India – Scope, salary and Recruiters
Preparing for and passing the FRM Part 2 exam is a significant achievement. The road to becoming a certified Financial Risk Manager is a marathon, not a sprint. It demands dedication, perseverance, and a strong belief in your capabilities. But once you cross the finish line, the rewards are both gratifying and significant.
We hope this comprehensive guide provides you with useful insights into the FRM Part 2 exam and helps you on your journey towards becoming a certified Financial Risk Manager. Good luck with your preparations!
Frequently Asked Questions
The FRM Part 2 exam is considered challenging due to the depth and breadth of topics covered and the practical application of concepts.
The FRM Part 2 exam is a 4-hour long exam consisting of 80 multiple-choice questions.