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Professional certifications are important both to the people who earn them and to the organizations they work for. In the financial field, the personnel involved in risk management can obtain several important certifications from two large international groups. In today’s uncertain financial environment, professional certifications can go a long way in calming investors and regulators, as well as restoring confidence in the financial system in general.

But before we discuss the organizational and individual benefits of the most common risk management certifications, we should spend some time becoming generally familiar with the certifications and the groups that offer them. There are two main groups that offer risk management certifications: the Professional Risk Managers International Association (PRMIA) and the Global Association of Risk Professionals (GARP). Both organizations list 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 about how professionals prepare for certification exams. The PRM is essentially a validation of skills that are likely to be acquired in everyday work in the field of risk management. The certification emphasizes professional standards and integrity in addition to skills and knowledge. In addition, the PRM assesses an individual’s ability not only to know best practices, but also her ability to apply those best practices in appropriate situations. The candidate must be a member of PRMIA to sit for the certification exams and, as in many cases with professional certifications, the candidate with other industry certifications such as CFA (Chartered Financial Analyst) may have an easier time earning the PMR. In the industry at large, hiring managers often use the PRM designation as a measure of the most desirable risk management skills.

GARP offers two major risk management certifications, FRM, or Financial Risk Manager, and ERM, 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 about 18,000 FRMs in the world, which is a small number for a globally 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.

The ERM certification is obviously for risk managers in the energy industry, who must also have at least two years of experience in the field of energy risk management. These professionals must also be members of the GARP. GARP is in the process of creating a continuing education program and requirements for ERM certification, which will most likely become a requirement in 2010. In the field of risk management, ERM is one of the only designations that has or is point of having 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 are looking for these professionals. 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 who hold these certifications also hold a wide variety of positions, from junior to executive levels. The most common jobs held by certified professionals in the field are risk managers, analysts, consultants, accountants, traders, portfolio managers, and even operations managers.

What exactly does the professional have to do to be certified as a risk manager? It depends on the program, but both the PRMIA and GARP certifications are strictly structured or strictly unstructured with regards to preparation, with both organizations certifying only after the exam. To earn 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 mathematics, best practices, ethics, conduct, and case studies. PRMIA will help a candidate prepare for the exam through a variety of preparation courses and seminars, but the candidate is not “officially” required to attend any courses. In fact, PRMIA encourages organizations to use the exams separately as ways to assess potential job candidates or to assess readiness for a promotion. As we discussed, a PRM candidate can take the entire battery of tests at once, or spread 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. The ERP certification, on the other hand, requires around 250 hours of study to prepare and is also just an exam. ERP core competencies include physical energy markets, risk management compliance, financial trading, and energy transaction valuation.

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 proof of knowledge and competence in specific areas. Your organization can use certifications as a way to market or demonstrate competence in the field, and you can even use the prospect of certification as a way to recruit and retain top talent. In today’s financial market, a certification can show a greater dedication to ethics and integrity, both at an 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 your organization.

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