Risk Management: Certification Curriculum and Exam Preparation

rrmccmgraphicBecoming a certified professional in any field can be a rigorous process. Some designations require classroom study and preparation, while others simply require that a designee pass an exam based on his or her knowledge. Curriculum is also important, but also based on the field. If the field is a dynamic one, such as the financial industry, then a curriculum should be dynamic to match the field. In terms of the risk management certifications, both PRMIA and GARP offer self study programs, designed to be “at pace” with the individual. But both organizations offer examinations that are rigorous and that will test the ability and knowledge of the candidate.

The PRM program is comprised of four exams. As we discussed, PRMIA does not require that a candidate take all four exams at one time, nor does the organization require that the exams be taken in a specific order. PRM Exam I covers theory related to finance, as well as financial instruments and markets. In Exam II, the candidate will need to understand the mathematics that accompanies risk measurement. Exam III is a test of common practices in the risk management filed, and exam IV covers professional standards, conduct, ethics, and bylaws as set by PRMIA.

The PRM exams are multiple-choice exams, consisting of 120 questions pulled from a database. Although the questions are multiple choice, the existence of a database proves that the organization is attempting to test from every possible angle. PRMIA reports that only 50% of its candidates actually finish the certification with the required 60% pass rate, so it appears that the exams are fairly difficult. Preparation is unstructured, that is, there is no actual requirement that a candidate attend courses. One of the first aspects that PRMIA stresses about exam preparation is that professionals in the field can prepare by simply doing their jobs well.

The organization also recommends that candidates examine all of the available resources, including professional journals, articles, online forums, conferences, and procedural documentation. PRMIA offers a self-study guide which the candidate can use to assess areas in which he or she needs further study and practice. The study guide also recommends reading in specific topic areas. The organization recommends a textbook (The Professional Risk Manager’s Handbook), which is written by 35 authors, as preparation for Exams I, II, and III. In order to prepare for Exam IV, the candidate is encouraged to examine a reading list provided by PRMIA. Once the candidate determines his or her areas for improvement, PRMIA offers online and classroom training targeted for those competency areas.

The FRM certification from GARP is undergoing change as of October 2009, mainly in response to the financial upheaval of the past two years. Depending on when a candidate submits interest for the certification, he or she may either be required to take one exam or two exams. All of the FRM exams are multiple choice; the exam with only one part, which will be “grandfathered” out, has 140 questions. The two part exam consists of 100 questions for Level I and 80 questions for level II.

In order to prepare for the two-level exam structure, the organization expects that the candidate will spend between 150 and 200 hours for each level. GARP offers a self study guide, as well as core readings that are available as a “course pack”. The FRM Handbook is recommended as a textbook for study and each participant can also prepare using practice exams available from GARP. The organization can also point candidates in the direction of local study groups and third party course providers. GARP does not offer training directly, naming this as a potential conflict of interest. There is a digital library where candidates can find information and readings on any of the competencies covered in the exam battery. As mentioned, the FRM curriculum, in the form of readings, textbook, and courses, changes regularly, and is being especially overhauled to match the new financial environment.

GARP’s ERP preparation and exam structure is very similar to the FRM’s. Candidates are expected to spend 250 hours in preparation of the exam, which covers physical energy markets, financial trading instruments, valuation and structure of energy transactions, risk management in financial trading, as well as disclosure, accounting, and compliance. This is obviously a broad-based curriculum for a specialty area of practice. As with the FRM, candidates can use a self-study guide, a course pack, a digital library, and sample exams in order to prepare for exam day. The ERP certification program is overseen by practicing professionals, which is in itself a dynamic aspect of curriculum and exam preparation.

Why is the curriculum and preparation method for certifications important to your organization? First, a dynamic curriculum ensures that whoever becomes certified will not only be exposed to a broad base of knowledge, but also to knowledge that is current. This is important in any field, but in the field of finance current knowledge takes on a life of its own. Oversight by practitioners is also of importance to the organization, for virtually the same reasons: content needs to be current. Broad-based areas of competency are also important, because you need to ensure that designees are able to function in a variety of knowledge areas, even if he or she is specialized. Knowing where a particular function “sits” in relation to the broad spectrum of financial activity is key to moving the organization forward.

What about the significance of self-study? We will go into more detail in this topic when we discuss competencies, but it’s important to note that a self-guided curriculum requires a dedication and focus that not every adult learner possesses. If you hire based on a certification such as the FRM, PRM, or ERP, you’ll know that you’re getting a person who is dedicated, able to focus, and possesses the skills to follow through.

Next, we will examine the recognition and standards set forth by risk management certifications.

Previous articleRecognition and Standard of PRM, FRM, and ERP
Next articleWhat Is the CFA Designation?
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.