Which Risk Management Certification Should You Choose?

Quick Highlights:

Risk managers earn an average base salary of $110,181 per year, making it a lucrative career choice.
The PRM certification offers broad risk management skills applicable across many industries, while FRM focuses on financial risk.
PRM certification requires a master’s degree or significant work experience, while the FRM certification does not have strict educational prerequisites.
Both PRM and FRM certifications are globally recognized, but PRM is better for general risk management roles, and FRM is ideal for financial risk professionals.

If you’re thinking about being a risk manager, you’re making a great choice. Risk managers earn $110,181 in average base salary per year. While you must earn professional certifications, you’ll get excellent ROI.

Why are risk managers crucial in society, especially in finance, in the first place? Effective risk management provides many benefits for organizations, finance-wise.

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Prevents financial losses
Improves profitability, liquidity, and financial stability
Contributes to SMART financial decision-making
Aids in change management
Maintains compliance with regulations and organizational reputation

We’ve seen many global events caused by ineffective risk management, too. Think of the Great Depression and the 1997 Asian financial crisis.

Going back to becoming a risk manager, there’s the PRM vs. FRM discussion. Both are recognized risk management certifications but these have distinct benefits.

The Professional Risk Manager certification enables a broad understanding of risk management. The Financial Risk Manager certification focuses more on financial risk management.

So, in the PRM vs. FRM discussion, which one is your best choice? Read on and get reliable information so you can make the right choice.

Related:

What Is Risk Management?

Risk management is a continuous process involving three aspects:

Identification of potential threats, risks, and uncertainties
Assessment of their impact on the organization
Mitigation of their negative effects on the organization’s financial and non-financial health

The potential threats, risks, and uncertainties come in many forms, too, including:

Liquidity risk (inability to pay financial obligations)
Credit risk (borrowers not paying their debts)
Operational risk (inability to achieve effective and efficient operations)
Market risk (fluctuations in asset prices like stocks)

Risk managers work so that these potential threats don’t put their organizations in the red. The best risk managers can forecast potential threats and, thus, decrease their impact. The impact covers both financial and non-financial aspects, such as company reputation. Take the case of the Lehman Brothers and its final collapse due to poor risk management.

Overview of the PRM Certification

What is PRM?

The Professional Risk Managers’ International Association (PRMIA) issues the PRM certification. This is a certification recognized around the world, too. The PRM certification’s main characteristics are:

Provides broad knowledge and skills in risk management
Emphasizes theory and application in risk management
Applies to all industries

If you’re looking for a versatile certification, go for the PRM certification. You can work in every industry, from business to nonprofits.

Requirements for PRM

You must meet the following eligibility requirements to become a PRM.

Either be a current PRMIA Sustaining member OR hold a RIM level membership, AND
Either have a master’s degree in business, finance, or economics, among other related fields OR hold a current CFA Charterholder membership.

If you don’t have a master’s degree, you can choose between two pathways.

A bachelor’s degree and two years of relevant full-time work experience OR
Four years of relevant full-time work experience

You must also pass the PRM certification exam. The streamlined PRM exam structure now consists of two exams, not four exams.

The Finance Foundation exam consists of 60 questions.
The Risk Management Practices has 84 questions.

Both exams have a four-hour time to complete. You can take one or two exams on the same day.

Career Benefits of PRM

You can enjoy these PRM certification benefits. First, be competitive for high-paying risk management jobs. You can be a risk officer, analyst, or consultant.

Second, enjoy the high demand for holders of the PRM certification. Besides the banking and finance industry, you can work in government agencies and nonprofits.

Overview of the FRM Certification

What is FRM?

The GARP – Global Association of Risk Professionals offers the FRM certification. GARP is a specialized certification that focuses on financial risk management. Industries covered include corporate finance, investment management, and banking.

Requirements for FRM

Unlike the PRM certification, there’s no specific educational prerequisite for the FRM certification. There’s no need for a bachelor’s or master’s degree to sit for the FRM exam.

The best FRM exam preparation is a strong background in risk management, finance, and math. If you have a bachelor’s degree in economics, finance, or math, you’re in a good place. Earning the FRM certification is also comparable to a master’s degree.

To earn it, you must meet these eligibility requirements.

Pass the FRM Exam Part I. Topics covered include risk management principles, financial markets, and quantitative analysis.
Pass the FRM Exam Part II. Advanced topics include investment management, operational risk, and risk modeling. There’s a four-year time limit from passing Part I to passing Part II.
Submit proof of at least two years of relevant full-time work experience in financial risk management or a related field.

Maintaining FRM certification demands continuing education and professional development. At least 40 CPD hours every two years is a must for this purpose.

Career Benefits of FRM

FRM certification opens career advancement opportunities at banks, consulting firms, asset management firms, and more. Job roles include:

Financial analysts
Risk managers with specializations in operations, credit, and market, and more
Auditors
Quantitative analysts
Treasury managers

There’s a high demand for skilled FRM-certified professionals, too. We live in a world where the stakes are high. FRM-certified professionals are sought after for their ability to deal with the stakes.

PRM vs. FRM: Key Differences

We can understand the key differences in the PRM vs. FRM comparison in table form.

	Exam Structure	Focus Areas	Global Recognition	Industry-Specific Applications
PRM Certification	Offered in two parts	– Risk theory and principles – Management strategies – Both financial and non-financial risks	Considered as gold standard in professional risk management	More diverse organizations hire PRM-certified professionals due to their broad understanding
FRM Certification	Offered in two parts	– Market, credit, and operational risks – More focus on financial risks	Considered as gold standard in financial risk management	More focused on organizations with high risks for losses from poor risk management (e.g., banking and finance industry)

In summary, both PRM and FRM certifications demand hard work to earn. You must pass a series of rigorous certification exams, among other requirements. Both are recognized around the world, too. But, their industry-specific applications differ. Then again, there’s also a certain leeway in using either certification in all industries.

Which Certification is Right for You?

There’s no single best certification for risk management professionals. Instead, the best risk management certification is the one that best suits you. You must consider these aspects when making your PRM vs. FRM choice.

Career Goals

If you’re more interested in risk management roles, the PRM certification is a better fit. But if you want to enter the financial services industry, consider the FRM certification.

Educational Background

The PRM certification has specific educational requirements, while the FRM certification doesn’t. You must also have specific knowledge and skills, such as math, finance, and economics.

If you’re into quantitative analysis and theory, go for the PRM certification. The FRM certification is best for people more into real-world applications.

Long-Term Career Prospects

There’s not much difference in the FRM vs. PRM salary comparison. In general, nonetheless, FRM-certified professionals tend to have higher starting salaries. The reason: Theirs is a more specialized job.

As for long-term career prospects, both offer excellent opportunities. You can be a C-suite executive with either risk management certification, too.

In summary, you must look into yourself when choosing between these two certifications. What’s best for you depends on your career goals and interests.

Study and Preparation Tips

How to Prepare for PRM

Look into these resources for your PRM exam preparation.

Official PRMIA exam materials
Textbooks on quantitative analysis and risk management
Online courses

Study relevant topics for 3-6 months before the PRM exam. Be sure to create and follow a study schedule.

How to Prepare for FRM

Practice for the FRM exam by:

Studying the official GARP study guides and resources
Reading popular FRM preparation books
Answering practice questions with a timer
Joining study groups

Study for 4-6 months for the FRM exam.

Common Myths and Misconceptions

PRM is Harder than FRM

No certification exam is harder than the other. It all depends on your preparation, academic and work background, and aptitude. The more prepared you are, the greater your chances of passing.

One Certification is More Respected than the Other

There’s equal global recognition of PRM and FRM certifications. Their suitability differs depending on your interests and goals.

Conclusion

In the PRM vs. FRM discussion, there’s no one-size-fits-all answer. Both risk management certifications are recognized as the gold standard. Earning either a PRM or a FRM credential opens career advancement opportunities in the risk management field. Both risk management certifications lead to high-paying jobs, too.

Your choice will depend on whether you want to be a generalist (PRM) or a specialist (FRM). In either case, you’re making the right choice if it results in your satisfaction.