Risk Management: PRMIA and GARP Certifications

FERMA-risk-management-certification-programProfessional certifications are important to both the individuals that obtain them as well as the organizations in which those individuals work. In the financial field, personnel involved in risk management can obtain several important certifications from two major international groups. In today’s uncertain financial environment, professional certifications can go a long way to calm investors and regulators, as well as restore faith in the financial system in general.

But before we look at the organizational and individual benefits of the most common risk management certifications, we should spend some time becoming generally familiar with the certifications and the groups that offer them. There are two major groups offering risk management certifications: the Professional Risk Managers’ International Association (PRMIA) and the Global Association of Risk Professionals (GARP). Both of these organizations show their certifications as widely recognized and accepted, although the organizations approach certifications differently.

PRMIA offers the Professional Risk Manager certification, or PRM. PRMIA calls the PRM certification “The Higher Standard in Risk Management” and is very flexible on how professionals prepare for the certification exams. The PRM is essentially a validation of skills that are most likely picked up in every day work in the risk management arena. The certification does stress professional standards and integrity in addition to skills and knowledge. Also, the PRM tests an individual’s ability to not only know best practices but his or her ability to apply those best practices in the appropriate situations. The candidate must be a member of PRMIA in order to sit for the certification exams, and, as in many cases with professional certifications, the candidate with other industry certifications, such as the CFA (Chartered Financial Analyst) may have an easier time attaining the PRM. In the industry at large, hiring managers often use the PRM designation as a measurement for the most desirable risk management skills.

GARP offers two major risk management certifications, the FRM, or Financial Risk Manager, and the ERM, or Energy Risk Professional. The FRM, according to GARP, is one of the certifications that is currently desirable to recruiters who are looking to fill senior risk manager positions. There are only around 18,000 FRM’s in the world, which is a small number for a professional certification that is recognized around the world. In order to qualify for the FRM, a professional must have two years related experience and must also be a member of GARP.

The ERM certification is obviously for energy industry risk managers, who must also have at least two years experience in the field of energy risk management. These professionals must also be members of GARP. GARP is in the process of creating a continuing education program and requirements for the ERM certification, which will most likely become a requirement in 2010. In the field of risk management, the ERM is one of the only designations that has or is about to have a continuing education requirement.

It’s a good idea to have a general feeling of what professionals hold risk management certifications – as well as what industries look for these professionals. The top industries with certified risk managers, and whose recruiters look for certifications, are banking, academics, asset management, and government. There are many other sectors of the financial industry in which you will find certified risk managers. Professionals who hold these certifications also hold a wide variety of positions, from junior through executive levels. The most common jobs held by certified professionals in the field are risk managers, analysts, consultants, accountants, traders, portfolio managers, and even operations managers.

What exactly does the professional have to undertake in order to become certified as a risk manager? It depends on the program, but both the PRMIA and GARP certifications are either strictly structured or strictly unstructured in regard to preparation, and both organizations certify only after examination. To obtain a PRM certification, the candidate must take four examinations, either separately within two years or all at once. These exams cover financial theory, financial markets, risk management mathematics, best practices, ethics, conduct, and case studies. PRMIA will help a candidate prepare for the examination through a variety of preparation courses and seminars, but the candidate is not required to “officially” attend any courses. In fact, PRMIA encourages organizations to use the exams separately as ways to test potential job candidates or to test for promotional readiness. As we discussed, a PRM candidate can take the entire battery of tests at one time, or can spread the four out over two years.

The GARP FRM certification is broad based, covering market risk, credit risk, operational risk, and risk management in investments. There is only one exam in order to obtain the FRM certification. The ERP certification, on the other hand, requires about 250 hours of study to prepare and is also only one examination. The ERP core competencies include physical energy markets, risk management compliance, financial trading, and valuation of energy transactions.

We will discuss specific benefits of these certifications throughout the risk management series, but it’s a good idea to consider why certifications might be important to your organization. A professional designation carries proof of knowledge and competence in specific areas. Your organization can use the certifications as a way to market or prove competence in the field, and can even use the possibility of certification as a way to recruit and retain the best talent. In today’s financial market, a certification may show a higher dedication to ethics and integrity, both on the organizational and individual levels, and this may help to satisfy regulatory agencies and shareholders.

The next step in this series is to look more closely at the curriculum and study methods for each of the certifications, and determine why this is important to the organization.

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Bryant Nielson is heavily involved in the Corporate Training and Leadership and Talent space. He currently is the Managing Director for CapitalWave Inc and the training division, Financial Training Solutions. He brings a diverse corporate experience of organizational development, learning and talent development, and corporate training, that also includes personal coaching of top sales individuals and companies of all sizes. For the prior 4 years, Bryant was the Managing Director and Leadership and Talent Manager for Lengthen Your Stride! LLC. In this position, Nielson was the developer of all of the courses for MortgageMae University (MMU), the Realtor Development Center (RDC), and of Lengthen Your Stride! (LYS). In that position, he developed material, refined over many years of use and active training, and condensed the coursework and training to be high impact, natural learning, and comprehensive. Bryant has over 27 years of Senior Management experience encompasses running his own Training and mortgage firm, in New York City. He strongly believes that the corporate training is not to be static but should 'engage and inspire' students to greater productivity and performance.

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