The Financial Risk Manager (FRM) exam is a globally recognized professional certification for risk professionals. The exam is conducted worldwide by the Global Association of Risk Professionals.

Just to give you a brief background on risk certification, as of now there are two global risk certifications: FRM offered by GARP, and PRM by PRMIA. Both the exams have got a huge following, and some people are even taking both the exams. Both the exams differ widely in their approach, and syllabus. We will discuss the differences between the two in another article.

Our objective for this article is to provide you some insight into the FRM exam and what's the best way to study for it and pass it. A few years back FRM exam used to be a single paper-based exam. Now, the format has changed and the exam has been divided into two parts: FRM Part 1 and FRM Part 2. While the Part I exam covers core areas of risk management such as quantitative analysis, financial markets and products, and essential risk modeling, Part 2 focuses on specific topics related to the practical implementation and execution of approaches to measuring and managing market, credit, operational and firm-wide risks, and also includes a section on current issues in financial markets.

Exam Format: Both part 1 and part 2 are paper based exams and are conduced in May and November every year. The Part 1 exam consists of 100 multiple choice questions and Part 2 consists of 80 multiple choice questions. Each exam is of 4-hour duration. You are required to pass the two parts in a sequence. Even though you are allowed to sit for both FRM Part 1 and Part 2 on the same day, your Part 2 exam paper will not be graded unless you have passed Part 1. You are allowed to carry an approved financial calculator in the examination room.

Recommended time to study: Depending on your current level of knowledge, expertise, and experience, you will have to devote anything between 100 to 400 hours to study and prepare for each part of the exam. As per GARP, students spend ~250 hours preparing for each part.

Studying for the Exam: Once you have decided to sit for the FRM exam, there are various options available to you to prepare and study for the exam. The first thing you need to do is to understand the syllabus of the exam, depending on which part you are writing. There is no comprehensive study material for the FRM exam. Instead GARP publishes a list of readings which a student is expected to read. These readings are hand-picked chapters taken from different books covering a variety of topics. There are two key documents available on GARP's website: The Study Guide, and the AIM Statements. The study guide provides a broad overview of the syllabus along with a list of readings. This study guide is available free of cost to everyone. The AIM statement is available only to the members who have registered for the exam. In the AIM statement, the learning objectives for each reading are specified. These learning objectives specify what exactly a student is expected to know from each reading.

Study Material: Once you have a grasp on the syllabus, it is time to decide on what material to use to study for the exam. There are several options available:

1. Buy the Books: As I mentioned earlier, GARP provides a reading list that you need to use to pass the exam. If you browse through this list, you will find that you may already have some of the books from which these readings/chapters are taken. For example, the book "Future, options and Other Derivatives" by John Hull, and "Value-at- Risk" by Philippe Jorion are found in every practitioner's library. If you can afford, it's a good idea to buy the books that you don't have as these are excellent books that will be useful to you for a long time.
2. GARP Digital Library: To make it easier for students, GARP has started selling the entire list of readings for both the exams. You can buy the entire reading list pack or individual readings depending on what you need. Both an online version and a printed version is available for the readings. I think this is the best option to study for the exam. The AIM statements and the suggested reading material is all that you require to pass the exam. If you're thorough you won't need anything else for your exam preparation.
3. Third-party Exam Prep: There are many third-party training providers that can help you with your exam preparation. The options include classroom training, self-study through printed material, and online courses. Based on your convenience, you can choose among these options.
4. Free Online Material: Many online portals are also putting up free material online (for example, Finance Train). You can also use this material along with official readings to prepare for the exam.

Practice: One of the most crucial aspects of your exam preparation is practice tests. Along with studying the notes, you also need to attempt many practice questions or take mock exams to gauge your real level of preparation. Ideally you should cover the entire exam syllabus at least 2 months before the exam and spend these two months practicing questions and reviewing the material.

All the best for the exam!