How to Prepare for PRM Exam – Part I
This post is for students who are preparing for or planning to write the PRM exam.
Professional Risk Manger (PRM) Exam has become quite popular among the risk professionals and students and competes head-on with the respectable Financial Risk Manager (FRM) Exam from GARP. Even though both the exams certify you as risk managers, the exams are quite different.
In this article, we will discuss in details about what PRM exam is all about and how to go about preparing for it.
PRM takes a holistic approach to the fieldof risk management and tests the students on all aspects of risk management. For this purpose, the complete PRM exam is divided into four exams. Candidates are required to pass four exams to achieve the PRM Designation:
- Exam I: Finance Theory, Financial Instruments and Markets
- Exam II: Mathematical Foundations of Risk Measurement
- Exam III: Risk Management Practices
- Exam IV: Case Studies, PRMIA Standards of Best Practice, Conduct and Ethics, Bylaws
The exams are computer-based, conducted at Pearson Vue testing centers. So, you can sign up to write the exam at any Pearson Vue center nearest to your location.
General Tips for Preparing
Let us first look at some general tips that are relevant for all the four exams. After that we will delve into specific subject matter related tips for each of the four exams.
Focus of the exam
The focus of the exam is to check your real understanding of the subject, rather then to check your memory power. Most of the questions in the exams are targeted at checking your conceptual understanding of the subject. Sometimes the questions may appear very simple, but they will really be checking your true knowledge. Of course, it is important to remember some important formulas, but more important than that is to get your basics right.
The study material
PRM publishes the PRM Handbook, which is the official reading material for the PRM exam. Apart from that there are many training providers, who provide PRM coaching.
The best way to prepare is to stick to one set of references to prepare for the exam, rather than diving into study materials from various providers.
For a diligent student, PRM handbook is the best resource to prepare for the exam. If you are preparing with the PRM Handbook, then you can also refer to other books such as Hull, Jorion or Fabozzi to understand any particular topic that you want more clarification on. However, for the most part, the PRM handbook is enough.
If you find PRM handbook difficult to follow (which it is at times), then you may buy study notes from a quality-training provider.
In any case, try to avoid referring to multiple sets of study materials. Doing this will be more confusion than help, because it is difficult to reconcile the differences between the two, and different providers use slightly different notations and approach.
Exam questions and practice
One drawback with PRM handbook is that it does not have any sample questions. The study guide does provide some sample questions for each exam, but that’s not sufficient. So, most likely, you will have to purchase mock tests from an external training provider. Even though not directly relevant, you should also check out the past exam question papers from FRM. This may not be directly relevant but will help because many topics between the two exams are common.
Preparation time and schedule
The preparation time for each exam is different.
Exam I and Exam III are lengthiest as they have more topics. Both these exams will require approximately 150 to 200 hours of study time.
For exam IV, how much time you will spend completely depends on your educational background. If you have a math background, it may take very less time (less than 100 hours). Without math background, you will have to build your knowledge from scratch and it can take longer.
Exam IV is the easiest and the study material is very concise. In my view, you won’t need more than 30 hours of study time for this.
The best way to study is to spend maximum time is reading the material (about 70%), and the remaining time (30%), for solving the practice tests and revising the material.
Use of calculator
In the exam, you are allowed to use an online scientific calculator. No other tools are allowed. So, while preparing for the exam, make it a habit to use the scientific calculator for all your practice, rather then using a spreadsheet. Also, remember that if a problem cannot be solved using the calculator, it will not be asked in the exam!
Managing time while writing the exam
The following table shows the number of questions in each exam and the exam durations:
Each exam provides plenty of time to answer the questions. Most likely, you will be able to complete the exam within 70% of the allotted time. So, you will have enough time to review the questions.
The best way to approach the paper is to not spend too much time on any question in the first run. Look at a question, and try to answer it. If you can answer it within reasonable time, say 2-3 minute, well and good. If you think you will take longer, just skip that question and move on to the next question. This way you would have gone through all the questions in half the time. In the remaining time you can come back to these unsolved questions and attempt them.
Another important point is that there is no negative marking for wrong answers. So, don’t leave any question unanswered, even if you are not sure of the answer.
This concludes the general tips. In the next posts, I will take up each exam and provide specific preparationtips related to the subject matter.
You can discuss more about the PRM exam at the PRM Exam Forum.