Best Advice and Techniques for Studying and Passing FRM Exams

It's not impossible to pass the Financial Risk Management (FRM) exam the first time, but it is very challenging. Exam candidates must perform intricate calculations and critical thinking in order to pass the FRM. A financial risk manager is expected to be thoroughly knowledgeable about the money markets in their regions and the rules that control them. The examinations accurately reflect how the certification is used in the actual world, thus getting ready for the exam is strongly advised.

The pass rates for FRM Part 1 and Part 2, which averaged at 51% each, were 42% and 60%, respectively, according to data released in May 2019. Such pass rates can be ascribed to a number of things, including inadequate preparation and exam topic knowledge. However, passing the exam will be simpler if you use the appropriate strategies during your FRM exam preparation.

1. Get to Know the Exam Structure

FRM exams are strictly structured to test candidates for a wide range of financial risk assessment areas. As such, its good practice to prepare your mindset for the type of exam you will be presented with. Try to get familiar with each topic in the FRM exam as much as you can during studying. Memorize the fundamental definitions and rules in order to have an easier time selecting right answers during the exam. In terms of content, each of the two parts of FRM examination includes:

FRM Part 1 Exam Structure (100 questions):

• Foundations of Risk Management (20%)
• Quantitative Analysis (20%)
• Financial Markets and Products (30%)
• Valuation and Risk Models (30%)

Part 2 Exam Structure (80 questions):

• Market Risk Measurement and Management (20%)
• Credit Risk Measurement and Management (20%)
• Operational and Integrated Risk Management (20%)
• Liquidity and Treasury Risk Management and Measurement (15%)
• Risk Management in Investment Management (15%)
• Current Issues in Financial Markets (10%)

2. Study Early and Frequently

Like with academic exams and papers, passing the FRM exam without proper preparation is nigh impossible. Even if you have practical experience in financial risk management, you should still clock in a good amount of study hours. Don’t put off your studying until the final weeks before the exam. It’s fairly difficult to pass the FRM exam even with proper prep work, let alone at the last minute. Start studying early and make sure that you devote several hours of your time to prepare each day. If you are committed to it, there is a high probability that you will pass your exam successfully on the first try.

3. Segment your Study Materials

As we’ve mentioned previously, FRM exams consist of several topics clustered into groups of related questions. Each area represents an FRM niche of its own, but you are required to know as much as possible about each topic to pass. You should segment your study sessions based on different question categories in order to devote the right amount of attention to each topic. Gather FRM exam materials on time and familiarize yourself with each topic on a fundamental level before you dive into more complex terminology and practices. Most importantly, don’t mix topics in your head when it comes to rules and regulations. This is a fatal mistake to make, so separate FRM exam segments as much as you can and tackle each one separately during your preparation.

4. Practice Leading up to the Exam

Once your FRM exam date gets closer, you should practice in simulated exam conditions. It can be good to take a short break between the long weeks of studying and practical tests however. This will give you time to process all of the FRM information you learned so far and contextualize it in your mind. When you start mock exams, save all of the tests for future review. Learn from your mistakes early on and you will have much better chances at passing the FRM exams. Time your answers and gauge how long it takes you to answer all questions in both exams. Make sure to practice regularly as your exam approaches to be as ready as possible for the real-world examination.

5. Stay Confident in your Abilities

It’s very easy to get discouraged by the FRM exam statistics. However, if you study for weeks and months before the exam takes place, this is an unwarranted worry. Stay confident in your ability to apply the knowledge you’ve gained during long study sessions. Think about which FRM niches attract you the most and consider these areas your strengths. The estimated passing score for FRM exams is 70%, meaning that you have a 30% window for areas you don’t feel confident in. You have started down the path of FRM examination for a reason – remember it as your exam comes closer and have faith in your abilities.

6. Work on your Weaknesses

While you have a chance to pass FRM exams even if you underperform in certain areas, you should mitigate those risks as much as possible. Review your study notes and mock exams to spot potential bottlenecks and areas in which you are underperforming. No one is perfect and it’s completely normal that you are attracted to some FRM niches more than others. However, the exams are structured in a way in which they will test your basic knowledge of each FRM segment regardless of personal preferences. Do additional mock tests and go through specific study materials again to make up for any information that might have slipped by you. Do your best to flesh out your weaknesses as much as possible before the exam takes place.

7. Take Timing into Consideration

FRM exams are time-limited, meaning that you will have to manage your time efficiently in order to answer all questions properly. Both Part 1 and Part 2 of FRM exams will give you 4 hours to work with. While that may seem like plenty at first glance, keep in mind that each exam consists of 100 and 80 questions respectively. Divide those numbers by 4 hours and you will average out at 2.5-3 minutes per question depending on the FRM exam. It is extremely important to take timing into consideration when dealing with each question on your exam sheet. Practice using time-management apps to get a better handle on timing. The worst thing that can happen is for you to be fully prepared for FRM exams but breach the available time limit. Do mock tests and limit your available time to learn how to manage available resources more effectively.

8. Rest Well Before the Exam

Lastly, it’s important to have a clear mind before going into your FRM exam. Taking 4-hour exams is very taxing no matter how experienced or sturdy you may be as a financial professional. As such, take a day to relax and gain strength for the upcoming examination to energize in a positive manner. Engage in something which will make you feel better like taking a walk, sleeping early, or watching a movie to clear your head. While it may seem counterproductive, this approach to final preparation will ensure that you remember what you studied more easily during the FRM exam itself. Don’t force your mind and body to stay tense and active until the exam – get proper rest and contextualize your knowledge before the final stretch.

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