Becoming a Financial Risk Manager Using the FRM® to Build and Advance Your Career William May Senior Vice President FRM Program Manager Global Association of Risk Professionals September 2011 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 Générale, Credit crisis • Financial innovation • Growth in use and availability of derivatives – 80s and beyond • Risk measurement techniques • Late 80s – early 90s – JP Morgan developed Value-at-Risk to quantify expected loss • 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. 2 Why would one consider becoming an FRM? • The risk management profession has seen considerable growth over the past 15 years, fueled by the complexity of financial products, increased regulation, and recent notable institutional failures. • Like other career paths in finance, having an advanced degree and certification in financial risk management helps to increase your career potential. • FRM holders have achieved positions such as Chief Risk Officer, Senior Risk Analyst, Head of Operational Risk, and Director, Investment Risk Management, to name a few. • Earning an FRM designation not only broadens your skill set, it demonstrates a standardized level of industry knowledge, making you a recognized leader in financial risk management. 3 Financial Risk Management Skills are in High Demand • Demand for financial risk managers is strong… Source: Indeed.com • And is expected to remain 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%.” Source CNN Money 4 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 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 5 2011 FRM Committee 6 Dr. René Stulz (Chairman) Everett D. Reese Chair of Banking and Monetary Economics, Ohio State University 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 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 - Firmwide Risk, Goldman Sachs 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 The FRM Program Part I Exam (4 hours, 100 MCQ) Part II Exam Demonstrate two years relevant work experience Certified Financial Risk Manager (FRM®) (4 hours, 80 MCQ) • 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 7 • 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%) Voluntary Continuing Education 40 hours/2 years Growth of the FRM 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 firm, regulatory body, and academic institution • 100,000th FRM candidate registered for the November 2010 exam Currently, there are over 20,000 Certified FRMs FRM Registrations Pass Rate Full Exam Part I 37.0% 42.9% 54.0% 53.3% 62.7% 58.9% 53.8% 52.5% 44.0% 44.8% 44.4% 42.4% 44.1% 55.2% Part II 52.5% 39.3% 54.0% 54.9% 8 Acceptance of the FRM Program 646 organizations have five or more FRM Candidates • Represent every major banking institution, government regulator, consulting firm and financial services institution around the world • Average annual growth of 30% 9 Top 20 companies with the most FRM Holders Global Participation in the FRM Program Significant growth throughout the world since 2007 FRM Registration Growth Since 2007 350% 300% 250% 200% 150% 2010 100% 50% 0% 10 2011 (Projected) Diversity of FRM Candidates Distribution of FRM Candidates – May 2011 Banking Financial Services (non-bank) Academic Risk & Technology Vendors Consulting Insurance Other 11 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 • 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 12 The FRM Exam Process Download 2011 FRM Study Guide • Outlines topics and readings for Part 1 and Part 2 Exams • Developed annually by FRM Committee • Insight from Certified FRMs and risk community 13 Register And Prepare • 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 • Developed with input from FRM Committee, certified FRMs and other risk professionals • 4 Hour exam, 100 Multiple Choice Questions • November 19, 2011, Morning Session Sit for Part 2 Exam • Developed with input from FRM Committee, certified FRMs and other risk professionals • 4 Hour exam, 80 Multiple Choice Questions • November 19, 2011, Afternoon Session FRM Registration Timeline and Fees Program Enrollment and Exam Registration Fee Part I Program Enrollment Fee (valid for 4 years) Part II USD 300 June 1, 2011 – July 31, 2011 USD 350 USD 350 August 1, 2011 – August 31, 2011 USD 475 USD 475 September 1, 2011 – October 15, 2011 USD 650 USD 650 • 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 [email protected] 14 November 2011 FRM Exam Sites Africa Kenya, Nairobi Nigeria, Lagos South Africa, Cape Town South Africa, Johannesburg South Africa, Vanderbijlpark Asia China, Beijing China, Chengdu China, Guangzhou China, Hong Kong China, Nanjing China, Shanghai China, Wuhan India, Bangalore India, Calicut, Kerala India, Chennai India, Hyderabad India, Kolkata India, Mumbai India, New Delhi Indonesia, Jakarta Israel, Tel Aviv (Sunday) Japan, Tokyo 15 Jordan, Amman Korea, Seoul Kuwait, Safat Lebanon, Beirut Malaysia, Kuala Lumpur Oman, Muscat Pakistan, Karachi Philippines, Manila Saudi Arabia, Riyadh Singapore Taiwan, Taipei Thailand, Bangkok United Arab Emirates, Dubai Americas Bermuda, Paget Brazil, Sao Paulo Canada, BC, Surrey Canada, Ontario, Toronto Canada, Quebec, Montreal Honduras, Tegucigalpa West Indies, Jamaica Mexico, Mexico City Peru, Lima USA, California, Los Angeles USA, California, San Francisco USA, Colorado, Denver USA, D.C., Washington USA, Florida, Tampa USA, Georgia, Atlanta USA, Illinois, Chicago USA, Louisiana, New Orleans USA, Massachusetts, Waltham USA, Michigan, Ann Arbor USA, New York, New York USA, NJ, New Brunswick USA, North Carolina, Charlotte USA, Ohio, Columbus USA, Pennsylvania, Philadelphia USA, Texas, Dallas USA, Texas, Houston USA, Washington, Seattle Europe Austria, Vienna Belgium, Brussels Bulgaria, Sofia Czech Republic, Prague France, Paris Germany, Frankfurt Germany, Munich Iceland, Reykjavik Ireland, Dublin Italy, Milan Luxembourg Poland, Warsaw Russian Federation, Moscow Spain, Barcelona Spain, Madrid Sweden, Stockholm Switzerland, Geneva Switzerland, Zurich The Netherlands, Amsterdam The Netherlands, Utrecht Turkey, Istanbul Ukraine, Kiev UK, England, London UK, Scotland, Edinburgh Oceania Australia, Melbourne Australia, Sydney New Zealand, Auckland 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 ($370 + shipping) • FRM Handbook ($122.50 + shipping) • FRM Training Course Providers • Local Study Groups • GARP Website • GARP Chapters • Social Media: LinkedIn, Facebook 16 Academic Outreach University Chapter Network • 35 chapters in 17 countries (from Cornell to Kenya and back again) • University Chapters give students a forum through which they can learn, communicate their ideas, and network with their peers and practitioners • Participation in University Chapter meetings gives students the chance to: –Better understand professional life and what to expect in the workplace –Be better equipped for the career opportunities that lie ahead for them in the risk management community • University Chapters give the practitioner community a forum to interact with and inform the academic community about relevant trends and issues in risk management • Partnership for Risk Education 17 Q &A 18 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 Lane London EC3R 7AE UK + 44 (0) 20 7397 9631 www.garp.org About GARP | The Global Association of Risk Professionals (GARP) is a not-for-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 comprehensive professional education and training for professionals of all levels. www.garp.org. © 2011 Global Association of Risk Professionals. All rights reserved.