FRM Certification: Financial Risk Manager Exams and Career

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The FRM (Financial Risk Manager) is a professional certification for people who identify, measure and manage financial risk. It is issued by GARP, the Global Association of Risk Professionals. To earn it, you pass two exams, FRM Part 1 and FRM Part 2, and complete two years of relevant work experience in financial risk management. The designation is recognized in more than 90 countries. It is most closely associated with risk roles in banking, insurance, asset management and consulting.

What Does FRM Mean?

FRM can mean two things. The first is the FRM designation, which GARP awards after a candidate passes both exams and meets the experience requirement. The second is the job function: a financial risk manager works out how an organization could lose money and what to do about it. Many people do this work without the certification. Holding it signals that a candidate has passed a standardized, globally administered test of risk knowledge.

The certification is built around applied risk management rather than theory for its own sake. Exam questions are framed around situations a risk manager would face in day-to-day work, such as measuring the exposure in a trading book or assessing the probability that a borrower defaults.

What a Financial Risk Manager Does

A financial risk manager looks for threats to an organization’s assets, earning capacity or overall success, then designs ways to reduce them. The work typically involves:

• Measuring exposure. Quantifying how much a portfolio, loan book or business line could lose under different conditions.
• Monitoring markets and the economy. Tracking interest rates, credit conditions and macroeconomic trends that could change the risk picture.
• Building mitigation strategies. Using hedges, limits, collateral, diversification or process controls to keep potential losses within tolerance.
• Reporting. Explaining risk positions to senior management, boards and regulators.

Many risk managers specialize. Common tracks include credit risk (borrower and counterparty default), market risk (losses from price, rate and currency moves), operational risk (failures in people, systems and processes) and liquidity risk (being unable to meet obligations or exit positions without heavy losses). FRMs work in financial services, banking, loan origination and trading. Risk teams also exist in healthcare, engineering, technology and natural resources.

FRM Certification Requirements

To become a certified FRM, you need to:

1. Pass FRM Part 1. This exam covers the quantitative and conceptual foundations.
2. Pass FRM Part 2. This exam applies those tools to specific risk categories. Both parts are compulsory; passing only one does not confer the designation.
3. Document two years of relevant work experience in financial risk management or a closely related field.

A bachelor’s degree is not among the stated FRM requirements. That rule belongs to the CFA program, which requires a degree, or the final year of one, before a candidate can start. After certification, GARP offers continuing professional development as an option, not as a condition of keeping the designation.

The FRM Exam: Part 1 and Part 2

Both parts are weighted by topic, which shows where study time pays off.

FRM Part 1 (100 questions)

Part 1 is where the math lives. Quantitative analysis covers probability, statistics and regression. Valuation and risk models covers pricing of bonds and options and measures such as value at risk. Financial markets and products, the joint-largest section, deals with how derivatives, fixed income and other instruments work. Because those two 30% sections make up 60% of the exam, a candidate who is weak on derivatives or valuation faces most of the scoring risk there.

FRM Part 2 (80 questions)

Part 2 is spread more evenly across risk categories. It moves from “how do these models work” to “how do you use them to manage a specific kind of risk.” The current issues section changes with developments in the industry, so its readings shift from one exam cycle to the next.

FRM Pass Rates and Difficulty

• Part 1: historically 40% to 50%. The 2023 rate was 45%.
• Part 2: historically 50% to 60%. The 2023 rate was 53%.

Part 2 often has the higher pass rate even though its material is more advanced. One explanation is that the candidates sitting it have already passed Part 1, so the pool is more prepared. A pass rate describes the group that sat the exam, not any one candidate’s odds. Someone with a quantitative degree and daily exposure to risk models starts in a different position from a career changer.

How Much Does the FRM Cost?

GARP charges a one-time $400 enrollment fee to first-time candidates, plus a registration fee for each exam part. Registering in the early window costs $600 per part. Standard registration costs $800 per part.

Minimum totals for a first-time candidate who passes each part on the first attempt and buys no outside study materials:

• Early registration for both parts: $400 + $600 + $600 = $1,600
• Standard registration for both parts: $400 + $800 + $800 = $2,000

Retaking a part means paying that part’s registration fee again. Third-party prep courses and practice question banks add to the total. GARP adjusts its fees periodically, so confirm the current schedule on GARP’s site before you budget.

FRM Careers and Salary

The U.S. Bureau of Labor Statistics does not publish a salary figure for FRM holders specifically. It groups risk managers within the broader financial managers occupation. The median annual pay for that group was $161,700 in 2024. Because the category also includes controllers, treasurers and other finance leaders, treat it as a reference point for the field rather than a promise tied to the certification.

The BLS projected 16% employment growth for financial managers from 2022 to 2032, much faster than the average for all occupations. It singled out cash management and risk management as specialties expected to be in high demand over the decade.

Typical roles for FRM holders include credit risk manager, market risk analyst, operational risk manager, regulatory risk manager and model validation analyst. Most work in financial services. According to GARP, these firms employ the most FRMs:

1. ICBC
2. Bank of China
3. HSBC
4. Agricultural Bank of China
5. Citigroup
6. KPMG
7. Deutsche Bank
8. Credit Suisse (since merged into UBS)
9. UBS
10. PwC

The list reflects two main employer types: banks that run internal risk functions and consultancies that advise on risk and regulation.

FRM vs. CFA

The CFA (Chartered Financial Analyst) is the other finance credential the FRM is most often compared with. The core difference is scope. The CFA program covers investment management broadly: financial analysis, corporate finance, equities, fixed income, derivatives and portfolio management. The FRM focuses on managing exposure to market, credit, operational and liquidity risk.

Which Is Better, CFA or FRM?

Neither is better in general. The choice depends on the job you want. The FRM fits roles defined by risk, such as credit risk, regulatory risk and operational risk management. The CFA fits investment roles such as research analyst, portfolio manager and financial adviser. Some professionals hold both, particularly in buy-side risk or quantitative portfolio roles where the two areas overlap.

Is the FRM Harder Than the CFA?

By the usual measures, the CFA is the longer climb. It has three exams instead of two, and lower early-level pass rates than the FRM: historically 35% to 50% for CFA Level 1 and Level 2, and around 50% for Level 3. “Tougher” is not the same as “harder for you,” though. The FRM is more concentrated in quantitative risk modeling, so a candidate comfortable with portfolio analysis but rusty on statistics may find FRM Part 1 the bigger obstacle.

Is the FRM Worth It?

The certification offers two main benefits:

• Recognition. The FRM is widely regarded as the leading designation in risk management. It gives employers a standardized signal of risk knowledge, which matters most when you are applying to banks and consultancies that already employ many FRMs.
• Knowledge. Preparing for both parts builds a working command of risk tools: how to model exposure, how to stress-test it and how to respond when conditions change.

The FRM makes the most sense if you are already in, or clearly targeting, a risk function. It is a weaker fit if your goal is equity research or portfolio management, where the CFA carries more weight. It is also a weaker fit if you lack a path to the two years of risk-related experience. You can pass both exams without that experience, but you cannot use the designation until the experience is in place.

The Bottom Line

The FRM suits professionals already working in or clearly targeting risk roles at banks, insurers, asset managers and consultancies. Candidates aiming for equity research or portfolio management will usually get more value from the CFA. Anyone without a realistic path to two years of risk experience should plan for it early, since passing both exams alone does not allow use of the designation.