A credentialed Financial Risk Manager has a very specific set of skills that help them manage risk.
Even with a broad range of knowledge, these individuals must be able to do this job well. The best way to determine if someone is ready for this type of position is with a comprehensive exam.
The FRM exam will cover the application of knowledge in different content areas, including risk and investment management.
If you’re interested in learning what you need to do to succeed on this exam, keep reading and find out more.
Tips to Prepare for the FRM Exam
To prepare for any exam, there are specific actions that you must take if you want to get a good score.
When you want to succeed on the FRM exam, you will need to use strategies that you learned in school, but also prepare the right way.
1. Learn About Each Exam Topic
The FRM exam is set up in two different parts. Part 1 has 100 questions that cover 4 topics.
This is where the big bulk of what you really need to know well in order to succeed as a Financial Risk Manager. Know this stuff first and foremost before you start studying for Part 2 of the exam.
The exam topics in Part 1 of the FRM exam include:
- Valuation and risk models
- Quantitative analysis
- Foundations of risk management
- Financial markets and products
In the second portion of the exam, there are 80 questions that cover 6 topics.
The topics covered in Part 2 of the FRM exam include:
- Risk management and investment management
- Operational risk and resiliency
- Credit risk measurement and management
- Current issues in the financial markets
- Market risk measurement and management
- Liquidity risk measurement and management
- Treasuring risk measurement and management
Each exam topic will test different information you need to know, so you must study each one to be fully prepared.
It’s a good idea to know a little bit about each of the topics that you know the exam will include, but once you have scraped the surface, continue studying until you know everything inside and out.
When studying, you may want to think about how you would explain these topics to another person. This will help you see how well you really understand them.
By knowing the basic information regarding FRM topics, you can have a better chance of narrowing down choices and choosing the correct answer on your exam day.
2. Utilize Test Taking Strategies
Regardless of how much you think you already know, you need to study for at least 200 to 240 hours for each part of the exam. You don’t want to procrastinate because cramming before a test is not a good strategy.
The exam is going to be almost impossible for you to pass if you don’t space out your study hours. Start studying as soon as you register!
You will be tested on your knowledge, but also your ability to read a question, understand the question, and apply concepts you know. During the test, you may come across a question that isn’t directly something you studied, but is something you can figure out based on what you did study!
Have a good grasp of each concept and learn how you can apply them in different situations. Knowing the basics of each topic is important, but studying for a deeper level of understanding is crucial for the FRM exam.
Use the test-taking skills you’ve learned in school, such as eliminating wrong answers, thinking about the technical definitions of words, or using the context of the question to find the answer.
3. Take a Preparation Course
If you don’t like to study on your own, you may want to consider signing up for a preparation course.
There are plenty of these that are offered online, but you will also be able to find some free ones. Paid courses are also available for people at any level of learning (beginner or expert), so you can easily find a class that may be able to help.
Learning from people that really know the material and can teach you what you need to know for the exam and future career may be a benefit that you won’t get on your own.
You’ll also have the opportunity to test your knowledge more effectively with quizzes and assignments.
There are plenty of reasons to take a course before you take the exam, but you may want to think about getting FRM coaching as well. You’ll be able to get specific feedback that will help you identify your strengths and weaknesses.
4. Practice Often Before You Take the Exam
You may want to consider taking some significant time to practice before the exam date. This means taking practice exams, timing yourself to feel the pressure, and grading your answers.
This is a good idea for several reasons, but it mostly will benefit you by simulating what the real test will feel like. By not looking at the test questions beforehand, you will literally be testing your knowledge effectively.
Try to utilize only 2 or 3 minutes per question to manage your time well.
Practice tests will tell you where you need to focus your energy by identifying the areas you are struggling in and the areas you are excelling in. This is a type of test-taking strategy, but it is one that you cannot ignore for the FRM exam.
5. Stay Calm and Focused
One of the things that you need to remember about taking any exam is that anxiety and nerves may get the best of you. Even if you have all of the knowledge in the world, you may not be able to think as clearly as you’d like during the real exam.
Create a plan for yourself if you start to lose confidence or feel anxious before or during the exam. Don’t panic if you find that you are struggling or you feel it’s more difficult than you thought it would be.
You can always put down your pencil and take a short break with deep breathing exercises to calm down.
Remember that you can always take an educated guess on questions if you truly don’t know the answer. Just because you didn’t know that one doesn’t mean you won’t know the next one!
You need to pass with a 70% and this means that you can still miss 30% of the questions. Although that wouldn’t be ideal, you need to remind yourself that you don’t have to get each question correct to succeed on this exam.
Are You Ready?
The FRM exam is a big deal for anyone that is interested in a career in the financial management field. You need to pass with a good score and to do that, you must be prepared!
After registering for the exam, you need to get started with your testing strategies, plan for success, and good study habits.
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