Risk is a part of life and business, but for most people, less risk is more. When businesses want to minimize risks to their assets, revenues or business model, they’ll often turn to financial risk management advisors.
Financial risk management advisors help businesses identify critical risks and create strategies to mitigate them. Many of these professionals hold the financial risk manager, or FRM, designation. Here’s what you need to know about financial risk management advisors and how to find them.
What Is a Financial Risk Manager?
The FRM designation is given by the Global Association of Risk Professionals, or GARP, to individuals who have passed the two-part FRM exam and completed two years of qualified full-time work experience. It is the leading certification for risk managers worldwide. There are more than 70,000 certified FRMs worldwide, according to GARP.
The designation is comparable to a master’s degree in the U.S., according to a benchmarking study by the National Recognition Information Centre for the United Kingdom.
“You’ll most often find financial risk managers in major banks, accounting firms, asset management firms, broker-dealers and regulatory agencies,” says Jason Steeno, president of CoreCap Investments and CoreCap Advisors in Southfield, Michigan. According to GARP, about 40% of FRMs worked in banks, 17% in asset management and 16% in consulting in 2021. About 5% worked for government agencies and another 5% at insurance companies.
Nearly every major bank, asset management firm, hedge fund, consulting firm and regulator employs an FRM, according to GARP. Some of the top employers of FRMs are the Industrial and Commercial Bank of China Ltd. (1398.HK), HSBC Holdings PLC (HSBC), Credit Suisse Group AG (CS), Citigroup Inc. (C) and Deutsche Bank (DB).
FRMs work to evaluate, monitor and mitigate different types of risk, such as operational, market and credit risk, Steeno says. The majority of their time is spent addressing market and credit risk, according to GARP’s latest survey of FRMs, with operational risk and resilience also a key component of the role. Less commonly, FRMs will work in liquidity and Treasury risk, or enterprise risk.
“Financial risk managers work in an integrated system to manage and communicate risk and recognize when to elevate an awareness of certain risks,” according to GARP’s FRM Global Practice Analysis 2021 report. The most commonly identified critical functions performed by FRMs were evaluating information and data for materiality, and employing appropriate risk measures and models to mitigate risk.
FRMs told GARP the most important tasks in their job include identifying and defining financial risks and pinpointing signs or sources of potential, emerging or existing risks.
How to Vet a Financial Risk Management Advisor
Since the FRM designation is the gold standard in the industry for financial risk managers, Steeno says looking for individuals who hold this designation is a good starting point for anyone hiring a financial risk manager.
“When looking for those holding the FRM designation, one can be assured the individual will have extensive training, work experience and knowledge of all facets of the risk management space,” Steeno says.
GARP has a searchable directory of FRMs on its website. You can search by location or name. There are also 20 professional chapters around the world, including ones in New York City; Chicago; Houston, Texas; Washington, D.C.; and Charlotte, North Carolina.
FRMs are also allowed to use the FRM badge on their social media sites, so be on the lookout for that as well.
Alongside an FRM designation, the other major component to look for in a financial risk manager is appropriate work experience in the risk management industry, Steeno says.
While FRM candidates must complete two years of relevant work experience to receive their designation, continuing education to maintain their certification is optional. GARP recommends that FRMs participate in the association’s Continuing Professional Development, or CPD, program and earn 40 credits every two years.
If you’re interviewing FRMs who have held the designation for more than two years, it’s worth asking about the CPD to determine whether they have kept their skills at their sharpest.
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