Becoming a Financial Risk ManagerUsing the FRM® to Build and

Advance Your Career

Global Association of Risk Professionals

June 2011

Becoming a Financial Risk Manager

Introductions and Agenda

• Growth of the risk management

profession

• Overview of the FRM Program

• Significance of the FRM designation

• What is covered on the FRM Exam

• Moderator

• Chris Donohue, Ph.D.

• Managing Director, GARP Research and Educational Programs

• Panelists

• Prof. René Stulz

• Everett D. Reese Chair of Banking and Monetary Economics, Ohio State University

2

• What is covered on the FRM Exam

• Preparing for the FRM Exam

• Registration Information

• Q&A

• Sample FRM Questions

• Chairman of the FRM Committee; Member, GARP Board of Trustees

• Michelle McCarthy

• Managing Director, Director of Risk Management, Nuveen Investment

• Member of the FRM Committee; Member, GARP Board of Trustees

• Masao Matsuda, Ph.D., FRM®, CAIA

• Owner, Crossgates Investment Management

• Bill May

• SVP, FRM Program Manager, GARP Research and Educational Programs

Introductions and Agenda

Growth of the risk management

profession

Overview of the FRM Program

Significance of the FRM designation

What is covered on the FRM ExamWhat is covered on the FRM Exam

Preparing for the FRM Exam

Registration Information

Q&A

Sample FRM Questions

Emergence of the Risk Management Profession

• Risk management profession only loosely existed 20 years ago

• Drivers of risk management as a profession

• Notable risk management failures

• Orange County, LTCM, Barings, Société

• Financial innovation

• Growth in use and availability of derivatives

3

• Growth in use and availability of derivatives

• Risk measurement techniques

• Late 80s – early 90s – JP Morgan developed Value

• Computational power

• Ability to gather position data and measure risk in a timely manner

• Best practice recommendations

• Group of 30 report

• Regulatory Initiatives

• International – Basel I, II, III

• National – Sox, Dodd-Frank, FSA, etc.

Emergence of the Risk Management Profession

Risk management profession only loosely existed 20 years ago

Drivers of risk management as a profession

Société Générale, Credit crisis

Growth in use and availability of derivatives – 80s and beyondGrowth in use and availability of derivatives – 80s and beyond

JP Morgan developed Value-at-Risk to quantify expected loss

Ability to gather position data and measure risk in a timely manner

Financial Risk Management Skills are in High Demand

• Demand for financial risk managers is strong…

4

Source: Indeed.com

• And is expected to remain strong…

• “Risk Management ranked #14 in the CNN Money and

100 careers with great pay and growth prospects, expecting 10

Source CNN Money

Financial Risk Management Skills are in High Demand

Demand for financial risk managers is strong…

“Risk Management ranked #14 in the CNN Money and PayScale.com’s 2010 list of top

100 careers with great pay and growth prospects, expecting 10-year job growth of 24%.”

GARP and the FRM

As the leading professional association for risk managers, GARP's

mission is to advance the risk profession through education, training

and the promotion of best practices globally.

• Not-for-profit association, founded in 1996• Over 150,000 members from 195 countries and territories

• Governed by Board of Trustees comprised of leading risk executives and

5

• Governed by Board of Trustees comprised of leading risk executives and researchers

• Offices in Jersey City, NJ and London

• Financial Risk Manager (FRM)• Leading global professional designation program for risk management

• Administered by GARP since 1997

• Program objective — assess an individual’s ability to measure and manage risk in a real-world environment

• FRM Committee comprised of senior risk managers and researchers oversee program

As the leading professional association for risk managers, GARP's

mission is to advance the risk profession through education, training

and the promotion of best practices globally.

profit association, founded in 1996Over 150,000 members from 195 countries and territories

Governed by Board of Trustees comprised of leading risk executives and Governed by Board of Trustees comprised of leading risk executives and

Leading global professional designation program for risk management

assess an individual’s ability to measure and manage risk

FRM Committee comprised of senior risk managers and researchers oversee

2011 FRM Committee

Dr. René Stulz (Chairman) Everett D. Reese Chair of Banking and Monetary Economics,

Rich Apostolik President and Chief Executive Officer, GARP

Richard Brandt Risk Oversight, Citibank

Juan Carlos Garcia Cespedes Head of Risk Methodologies, BBVA

Dr. Chris Donohue Managing Director, Head of GARP Research Center

Hervé Geny Global Head of Risk, ICAP

Dr. Satyajit Karnik, FRM Fordham University

Kai Leifert, FRM Regional CRO, Northern Trust Global Investments

6

Kai Leifert, FRM Regional CRO, Northern Trust Global Investments

Steve Lerit Senior Vice President, Bank of America

William May Senior Vice President, GARP Research Center

Michelle McCarthy Managing Director, Director of Risk Management, Nuveen Investments

Michael B. Miller, FRM Head of Risk Management, Tremblant Capital Group

Ezra Uzi Moualem, FRM Vice President, The Financial Institute of Israel & Managing Director, ZRisk

Dr. Victor Ng Vice President, Head of Risk Modeling

Dr. Elliot Noma Managing Director, Garrett Asset Management

Liu Ruixia Deputy General Manager, Risk Management, Industrial and Commercial Bank of China

Robert Scanlon Group Chief Credit Officer, Standard Chartered Bank

Dr. Til Schuermann Partner, Oliver Wyman

Serge Sverdlov Senior Quantitative Manager, Microsoft Corporation

Alan Weindorf Treasury, Visa

D. Reese Chair of Banking and Monetary Economics, Ohio State University

President and Chief Executive Officer, GARP

Head of Risk Methodologies, BBVA

Managing Director, Head of GARP Research Center

Regional CRO, Northern Trust Global InvestmentsRegional CRO, Northern Trust Global Investments

of America

Senior Vice President, GARP Research Center

Managing Director, Director of Risk Management, Nuveen Investments

Head of Risk Management, Tremblant Capital Group

Vice President, The Financial Institute of Israel & Managing Director, ZRisk

Vice President, Head of Risk Modeling - Firmwide Risk, Goldman Sachs

Managing Director, Garrett Asset Management

Deputy General Manager, Risk Management, Industrial and Commercial Bank of China

Group Chief Credit Officer, Standard Chartered Bank

Senior Quantitative Manager, Microsoft Corporation

The FRMProgram

• Two-part program

Part II Exam

(4 hours, 80 MCQ)

Part I Exam

(4 hours, 100 MCQ)Demonstrate two

years relevant

work experience

7

• Two-part program• Part I curriculum covers the tools used to assess risk

• Foundations of Risk Management (20%)

• Quantitative Analysis (20%)

• Financial Markets and Products (30%)

• Valuation and Risk Models (30%)

• Part II curriculum focuses on the practical application of those tools

• Market Risk Measurement and Management (25%)

• Credit Risk Measurement and Management (25%)

• Operational and Integrated Risk Management (25%)

• Risk Management in Investment Management (15%)

• Current Issues in Financial Markets (10%)

Certified

Financial Risk

Manager (FRM®)

Voluntary

Continuing

Education

40 hours/2 years

Part I curriculum covers the tools used to assess risk

Part II curriculum focuses on the practical application of those tools

Risk Management in Investment Management (15%)

The FRMExam Process

Download

2011 FRM

Study Guide

Register

And

Prepare

8

• Outlines topics and

readings for Part 1 and

Part 2 Exams

• Developed annually by

FRM Committee

• Insight from Certified

FRMs and risk

community

• Register on GARP

website:

www.garp.org/frm

• Leverage candidate

resources, including

practice exams, books,

course packs, FRM

training providers

(more later)

Sit for Part 1

Exam

Sit for Part 2

Exam

practice exams, books,

• Developed with input

from FRM Committee,

certified FRMs and

other risk professionals

• 4 Hour exam, 100

Multiple Choice

Questions

• November 19, 2011,

Morning Session

• Developed with input

from FRM Committee,

certified FRMs and

other risk professionals

• 4 Hour exam, 80

Multiple Choice

Questions

• November 19, 2011,

Afternoon Session

Growth of the FRMProgram

• Average growth of 34% in registered candidates per year since 2000

• 2010 registrations represent over 4,447 firms globally

• Exams offered in 92 locations around the world in 2010

• Registrants come from every major financial institution, consulting

firm, regulatory body, and academic institution

• 100,000th FRM candidate registered for the November 2010 exam

Currently, there are over 20,000 Certified FRMs

9

FRM Registrations

Currently, there are over 20,000 Certified FRMs

Full Exam 37.0% 42.9% 54.0% 53.3% 62.7% 58.9% 53.8%

Part I

Part II

Pass Rate

Program

Average growth of 34% in registered candidates per year since 2000

2010 registrations represent over 4,447 firms globally

Exams offered in 92 locations around the world in 2010

Registrants come from every major financial institution, consulting

FRM candidate registered for the November 2010 exam

20,000 Certified FRMs20,000 Certified FRMs

52.5% 44.0% 44.8% 44.4% 42.4% 44.1%

55.2% 52.5% 39.3%

54.0% 54.9%

Acceptance of the FRMProgram

• Represent every major banking institution,

government regulator, consulting firm and financial

services institution around the world

• Average annual growth of 30%

646 organizations have five or more FRM Candidates

10

Program

government regulator, consulting firm and financial

Top 20 companies with the most FRM Holders

Global Participation in the FRM

Significant growth throughout the world since 2007

250.0%

300.0%

350.0%

FRM Registration Growth Since 2007

11

0.0%

50.0%

100.0%

150.0%

200.0%

Global Participation in the FRMProgram

Significant growth throughout the world since 2007

FRM Registration Growth Since 2007

2010

2011 (Projected)

Diversity of FRMCandidates

Distribution of FRM Candidates

12

Candidates

Distribution of FRM Candidates – May 2011

Banking

Financial Services (non-bank)Financial Services (non-bank)

Academic

Risk & Technology Vendors

Consulting

Insurance

Other

Strengthening the FRM Program

• FRM Part I Books with Pearson

• Available this month (May 2011)

• Global Job Task Analysis

• A formal study of the current knowledge, skill and

abilities required to perform the job of financial

risk manager globally

13

risk manager globally

• To validate the appropriateness of the current FRM

examination and to guide the design of future FRM

program

• University Partnerships

• Working with universities globally to develop and

enhance risk curricula and to directly embed the

FRM examination into academic programs

• Continuing Professional Education

• Launched in late 2010

Program

A formal study of the current knowledge, skill and

abilities required to perform the job of financial

To validate the appropriateness of the current FRM

examination and to guide the design of future FRM

Working with universities globally to develop and

enhance risk curricula and to directly embed the

FRM examination into academic programs

Value of the FRM Program

• Knowledge

• Career Enhancement/Advancement

• 85% of certified FRMs surveyed responded that they would “certainly/more

likely” hire a candidate with the FRM designation over a candidate without

the credential

• Samples from GARP’s Career Center

14

• Samples from GARP’s Career Center

• Senior Risk Officer

• Job Requirement: FRM Certification

• Senior Derivatives Analyst

• Job Requirement: Progress or completion of CFA and/or FRM a plus

• Senior Analyst, Market Risk

• Qualifications: CFA/FRM

• Director – Risk Ratings

• Preferred Qualifications: Professional qualifications (CFA, FRM) a plus

• Professional Recognition

Value of the FRM Program

85% of certified FRMs surveyed responded that they would “certainly/more

likely” hire a candidate with the FRM designation over a candidate without

Samples from GARP’s Career CenterSamples from GARP’s Career Center

Job Requirement: Progress or completion of CFA and/or FRM a plus

Professional qualifications (CFA, FRM) a plus

FRM Registration Timeline and Fees

Program Enrollment and Exam Registration Fee

Program Enrollment Fee (valid for 4 years)

June 1, 2011 – July 31, 2011

August 1, 2011 – August 31, 2011

September 1, 2011 – October 15, 2011

15

September 1, 2011 – October 15, 2011

• Enrollment fee includes 1-year complimentary GARP membership

• Candidates can elect to take both Part I and Part II in November

• However, candidate must pass Part I to have Part II exam scored

• Deferral policy

• Questions? Contact frm@garp.com

FRM Registration Timeline and Fees

Program Enrollment and Exam Registration Fee

Part I Part II

Fee (valid for 4 years) USD 300

USD 350 USD 350

USD 475 USD 475

October 15, 2011 USD 650 USD 650October 15, 2011 USD 650 USD 650

year complimentary GARP membership

Candidates can elect to take both Part I and Part II in November

However, candidate must pass Part I to have Part II exam scored

frm@garp.com

November 2011 FRM Exam Sites

Africa Jordan, Amman

Kenya, Nairobi Korea, Seoul

Nigeria, Lagos Kuwait, Safat

South Africa, Cape Town Lebanon, Beirut

South Africa, Johannesburg Malaysia, Kuala Lumpur

South Africa, Vanderbijlpark Oman, Muscat

Pakistan, Karachi

Asia Philippines, Manila

China, Beijing Saudi Arabia, Riyadh

China, Chengdu Singapore

16

China, Chengdu Singapore

China, Guangzhou Taiwan, Taipei

China, Hong Kong Thailand, Bangkok

China, Nanjing United Arab Emirates, Dubai

China, Shanghai

China, Wuhan Americas

India, Bangalore Bermuda, Paget

India, Calicut, Kerala Brazil, Sao Paulo

India, Chennai Canada, BC, Surrey

India, Hyderabad Canada, Ontario, Toronto

India, Kolkata Canada, Quebec, Montreal

India, Mumbai Honduras, Tegucigalpa

India, New Delhi West Indies, Jamaica

Indonesia, Jakarta Mexico, Mexico City

Israel, Tel Aviv (Sunday) Peru, Lima

Japan, Tokyo USA, California, Los Angeles

November 2011 FRM Exam Sites

USA, California, San Francisco Germany, Munich

USA, Colorado, Denver Iceland, Reykjavik

USA, D.C., Washington Ireland, Dublin

USA, Florida, Tampa Italy, Milan

USA, Georgia, Atlanta Luxembourg

USA, Illinois, Chicago Poland, Warsaw

USA, Louisiana, New Orleans Russian Federation, Moscow

USA, Massachusetts, Waltham Spain, Barcelona

USA, Michigan, Ann Arbor Spain, Madrid

USA, New York, New York Sweden, StockholmUSA, New York, New York Sweden, Stockholm

USA, NJ, New Brunswick Switzerland, Geneva

USA, North Carolina, Charlotte Switzerland, Zurich

USA, Ohio, Columbus The Netherlands, Amsterdam

USA, Pennsylvania, Philadelphia The Netherlands, Utrecht

USA, Texas, Dallas Turkey, Istanbul

USA, Texas, Houston Ukraine, Kiev

USA, Washington, Seattle UK, England, London

UK, Scotland, Edinburgh

Europe

Austria, Vienna Oceania

Belgium, Brussels Australia, Melbourne

Bulgaria, Sofia Australia, Sydney

Czech Republic, Prague New Zealand, Auckland

France, Paris

Germany, Frankfurt

FRM Candidate Resources

• 2011 FRM Study Guide (Free)

• 2011 FRM AIMS (Free)

• 2011 FRM Practice Exams (Free)

• 2011 FRM Part 1 Books ($250 + shipping)

• 2011 FRM Part 2 Course Pack

17

• 2011 FRM Part 2 Course Pack

($370 + shipping)

• FRM Handbook ($122.50 + shipping)

• FRM Training Course Providers

• Local Study Groups

• GARP Website

• GARP Chapters

• Social Media: LinkedIn, Facebook

FRM Candidate Resources

2011 FRM Practice Exams (Free)

2011 FRM Part 1 Books ($250 + shipping)

2011 FRM Part 2 Course Pack 2011 FRM Part 2 Course Pack

FRM Handbook ($122.50 + shipping)

FRM Training Course Providers

Q & A

• Please enter questions into the text box on the screen

and submit

18

Please enter questions into the text box on the screen

Q & A – Previously Submitted Questions

• How does the FRM compare to other certifications?

• How applicable is the FRM to risk management positions outside

of banking?

• How many hours of prep time is needed to pass the FRM exams?

Distribution of FRM Preparation Time

19

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

< 100 hours 100-150 hours

150-200 hours

200-250 hours

Distribution of FRM Preparation Time

Previously Submitted Questions

How does the FRM compare to other certifications?

How applicable is the FRM to risk management positions outside

How many hours of prep time is needed to pass the FRM exams?

Distribution of FRM Preparation Time - May 2011

250 250-300 hours

300-350 hours

350-400 hours

400 hours

Distribution of FRM Preparation Time - May 2011

Learning More and Connecting with GARP

• Learn more about the FRM Program, including Exam

preparation resources at:

www.garp.org/frm

• Connect with other Certified FRMs and FRM Exam

20

• Connect with other Certified FRMs and FRM Exam

candidates at:

www.facebook.com/garpfrm

www.linkedin.com – search via term “GARP LinkedIn”

• Follow GARP on Twitter:

@GARP_Risk

Learning More and Connecting with GARP

Learn more about the FRM Program, including Exam

Email: frm@garp.com

Connect with other Certified FRMs and FRM Exam Connect with other Certified FRMs and FRM Exam

www.facebook.com/garpfrm

search via term “GARP LinkedIn”

Creating a culture of

risk awarenessTM

Global Association of

Risk Professionals

111 Town Square Place

Suite 1215

Jersey City, New Jersey 07310

USA

+ 1 201.719.7210

Minster House, 1st Floor

42 Mincing Lane42 Mincing Lane

London EC3R 7AE

UK

+ 44 (0) 20 7397 9631

www.garp.org

© 2011 Global Association of Risk Professionals. All rights reserved.

About GARP | The Global Association of Risk Professionals (GARP) is a not-for-profit global membership organization dedicated to preparing p

better informed risk decisions. Membership represents over 150,000 risk management practitioners and researchers from banks,

academic institutions, and corporations from more than 195 countries. GARP administers the Financial Risk Manager (FRM

certifications recognized by risk professionals worldwide. GARP also helps advance the role of risk management via comprehens

professionals of all levels. www.garp.org.

profit global membership organization dedicated to preparing professionals and organizations to make

better informed risk decisions. Membership represents over 150,000 risk management practitioners and researchers from banks, investment management firms, government agencies,

academic institutions, and corporations from more than 195 countries. GARP administers the Financial Risk Manager (FRM®) and the Energy Risk Professional (ERP®) exams;

certifications recognized by risk professionals worldwide. GARP also helps advance the role of risk management via comprehensiveprofessional education and training for