The Art of Risk Management

What is risk management?

Risk is something which we all have in our lives. But we can always learn how to manage risk. This can be done by identification, analysis and response to risk factors that form the part of the life of business.

Risk Management in Finance: Overview

Finance in the corporate world is very volatile. Volatility is an inherently the market risk. It plays into your hands and then lays waste to all your plans, like water, which can both nourish and destroy. Risk management is the art that directs the process of portfolio management in the right direction.

Financial Risk Management:

FRM is a globally recognized course designed by GARP [Global Association of Risk Professional] which sets global standards for financial risk. Finance is itself a huge field involving investments, credit, debit, insurance etc. We should know that the money we invested is risk free or has less or more risk. Financial risk management is the process of understanding and managing the financial risks that your business might be facing either now or in the future.

It's not about eliminating risks, since few businesses can wrap themselves in cotton wool. Rather, it's about having your own boundaries. The idea is to understand what strategies you will implement while willing to take the risk or what risk you will rather avoid.

“Managing expectations” Risk management is the most coarse two words in the business dictionary. A source of vast confusion in the profession of management. A word that has distinct meaning in a wide variety of domains.A word that needs to be immediately clarified when it comes up in a conversation.

Peter Drucker wrote in his 1973 book “Management, Tasks, Responsibilities, Practises’’

“The first test of any business is not the maximisation of profit but the achievement of sufficient profit to cover the risks of economic activity and thus to avoid loss’’

FRAMEWORK OF FRM

The course designed has two levels in it:

• FRM level 1

• FRM level 2

Who can give FRM?

• There is no such minimum eligibility criteria anyone can write the FRM level 1 exam.

• Only after the completion of level 1 examination we can give FRM level 2.

How to give FRM?

Firstly for giving FRM we have to register with GARP and we have to register with a certain amount of fee which has to be paid for being able to give the exam or having your own seat.

The topics of the FRM exam are:

• Foundations of risk management

• Quantitative analysis

• Financial markets and products

• Valuation and risk models

• Market risk measurement and management

• Credit risk measurement and management

• Operational risk and resiliency

• Liquidity and treasury risk measurement and management

• Risk management and investment management

• Current issues in financial markets