Professional certifications are important both to the people who earn them and to the organizations they work for. In the financial field, personnel involved in risk management can obtain several important certifications from two major international groups. In today’s uncertain financial environment, professional certifications can go a long way toward calming investors and regulators, as well as restoring faith in the financial system as a whole.
But before we look at the organizational and individual benefits of the most common risk management certifications, we should spend some time getting a general familiarity with the certifications and the groups that offer them. There are two main groups that offer risk management certifications: the International Association of Professional Risk Managers (PRMIA) and the Global Association of Risk Professionals (GARP). Both organizations display their certifications as widely recognized and accepted, although the organizations approach certifications differently.
PRMIA offers the Professional Risk Manager, or PRM certification. PRMIA calls PRM certification “The Highest Standard in Risk Management” and is very flexible in how professionals prepare for certification exams. The PRM is essentially a validation of skills that are likely to be acquired in daily work in the field of risk management. Certification emphasizes professional standards and integrity, in addition to skills and knowledge. Additionally, the PRM assesses a person’s ability not only to know best practices, but also their ability to apply those best practices in the right situations. The candidate must be a member of PRMIA to be able to sit for the certification exams and, as in many cases with professional certifications, the candidate with other industry certifications, such as the CFA (Chartered Financial Analyst) may have an easier time obtaining the certification . PRM. In the general industry, hiring managers often use the PRM designation as a measure of the most desirable risk management skills.
GARP offers two main risk management certifications, the FRM or Financial Risk Manager and the ERM or Energy Risk Professional. The FRM, according to GARP, is one of the certifications that is currently desirable for recruiters looking to fill senior risk manager positions. There are only around 18,000 FRMs in the world, which is a small number for a worldwide recognized professional certification. To qualify for the FRM, a professional must have two years of related experience and must also be a member of GARP.
ERM certification is obviously for energy industry risk managers, who must also have at least two years of experience in the field of energy risk management. These professionals must also be members of GARP. GARP is in the process of creating a continuing education program and requirements for ERM certification, which will likely become a requirement in 2010. In the field of risk management, ERM is one of the only designations that it has or is available for. about to have a continuing education requirement.
It’s a good idea to get a general idea of which professionals have risk management certifications, as well as which industries these professionals are looking for. The top industries with certified risk managers and whose recruiters seek certifications are banking, academia, asset management, and government. There are many other sectors of the financial industry where you will find certified risk managers. Professionals holding these certifications also hold a wide variety of positions, from junior to executive levels. The most common jobs that certified professionals fill in the field are risk managers, analysts, consultants, accountants, traders, portfolio managers, and even operations managers.
What exactly must the professional do to become certified as a risk manager? It depends on the program, but the PRMIA and GARP certifications are either strictly structured or strictly unstructured when it comes to preparation, with both organizations certifying only after the exam. To obtain a PRM certification, the candidate must take four exams, either separately within two years or all at once. These exams cover financial theory, financial markets, risk management math, best practices, ethics, conduct, and case studies. PRMIA will help the candidate prepare for the exam through a variety of preparation courses and seminars, but the candidate is not required to “officially” attend any course. In fact, PRMIA encourages organizations to use separate exams as ways to screen potential job candidates or to assess promotion readiness. As we discussed, a PRM candidate can perform the entire battery of tests at once, or can distribute all four over two years.
The GARP FRM certification is broad-based and covers market risk, credit risk, operational risk, and investment risk management. There is only one exam to get the FRM certification. ERP certification, on the other hand, requires around 250 hours of study to prepare and is also just an exam. The core competencies of ERP include physical energy markets, risk management compliance, financial trading, and the valuation of energy transactions.
We’ll discuss the specific benefits of these certifications throughout the risk management series, but it’s a good idea to consider why certifications might be important to your organization. A professional designation carries a test of knowledge and competence in specific areas. Your organization can use certifications as a way to market or demonstrate its competence in the field, and it can even use the possibility of certification as a way to recruit and retain the best talent. In today’s financial market, a certification can show a greater dedication to ethics and integrity, both at the organizational and individual level, and this can help satisfy regulatory agencies and shareholders.
The next step in this series is to take a closer look at the curriculum and study methods for each of the certifications and determine why this is important to the organization.
