FRM Job Task Analysis:

Executive Summary

FRM Job Task Analysis:

Executive Summary

GARP recently completed a Financial Risk Manger (FRM) Job Task Analysis to identify the work
performed by financial risk professionals and the knowledge and skills required to effectively
perform these tasks. Our findings indicate a need for risk managers to not only have the
traditional quantitative and technical skills associated with risk management but also the ability
to effectively interpret and communicate their findings to stakeholders.
Participants by Company Type
0%

10%

20%

30%

Purpose & Method

40%

Bank
Asset
management

The purpose of the FRM Job Task Analysis is to better

understand the daily reality of a financial risk manager in
order to keep the FRM curriculum consistent
with this reality.

Consulting
company
Insurance
company
Broker/Dealer
Regulatory
agency

Participants by Current Position Description

0%
Perform Risk
Management
Tasks
Work with risk
professionals
Supervise risk
professionals
Teach risk
professionals

10%

20%

30%

40%

50%

60%

An expert panel of FRMs delineated the major

responsibilities of a financial risk management
professional and the tasks associated with each of these
major responsibilities. The panel also outlined the
knowledge and skills needed to perform the tasks and
responsibilities that they had identified. Several additional
rounds of vetting and refinement took place until a final
survey instrument was created and distributed to the
global risk community.
Over the course of three months, more than 1,400 risk
professionals (over 1,100 were FRMs) responded to the
survey. Respondents came from over 90 countries around
the world and work in a range of financial services industries. The majority directly perform risk management tasks
and hold at least a masters degree.

JTA | Executive Summary

Findings

Findings Cont.

Insights
Insights

Communicating risk to stakeholders:

the most important task for risk managers

Survey respondents identified the communication of risk to stakeholders as the most important task
for risk practitioners, reflecting industry shifts. No longer are quantitative skills sufficient for
success in the risk profession. Risk managers are now being asked to translate risk findings to
non-technical managers who can fold them into strategic discussions. Christopher Donohue, PhD,
Managing Director of Research and Educational Programs at GARP commented, Effective risk
management is not confined to measuring and modeling risk, but includes being able to
communicate risk and its impact on the business and to influence in that regard.
The importance of communication in the risk function is likely a result of increased board
participation in the risk governance process.

VaR: still relevant,

but so is recognizing its deficiencies

VaR remains an integral part of the way risk is measured today. Estimating, interpreting and reporting
VaR was the second most important task for risk professionals according to the study. Making sense
of VaR was also identified as the second most important skill.
That said, the ability to recognize and communicate the deficiencies of VaR was also identified as an
important skill. With the expansion of modeling variations that are more nuanced, comprehensive
and forward-looking, VaR is an important but limited tool for risk practitioners. Dr. Donohue notes,
While VaR remains relevant, the survey also indicates that risk managers must be able to
understand and communicate its shortcomings. Additionally, risk managers expect the trend away
from VaR toward stress testing and other risk measures will continue, which is likely being driven by
regulators and Basel III expectations.

JTA | Executive Summary

Regulatory mandates increasingly

influence daily risk management tasks
As companies are being more closely watched by regulators, its no surprise that governance and validation appear high on the list of important tasks for risk professionals. Organizations depend on the
risk team to answer regulatory inquiries about models, as risk and regulation continue to see more
board-level attention.

Quantitative analysis alone

receives less emphasis
The study found that those teaching risk management placed a higher emphasis on the quantitative
aspects of the profession than did practitioners and supervisors. All groups surveyed considered it
less important than other elements of risk management. While risk management still encompasses
many highly quantitative tasks and requires general quantitative aptitude, emphasis is shifting to
more qualitative ways to address risk needs. Regulators are interested in the numbers, but more
importantly, they are interested in the insights being pulled from the numbers. Risk professionals
must be able to address how an organizations view of the world is influencing the assumptions used
in stress testing. As a result, purely quantitative skills and tasks are seen as less important than in
years past. This suggests that the sophisticated math generally associated with the risk profession
alone is not enough. It must be coupled with a broader understanding of model limitations and
market behavior under stress as well as the ability to communicate effectively.
Average Importance Ranking of Tasks by Domain
Model Risk Governance
Financial Markets
Enterprise Risk Management
Modeling
Market Risk
Portfolio Management
Risk Governance
Credit Risk
Operational Risk
Quantitative Analysis
Least Important

Most Important
JTA | Executive Summary

Expectations for the Future

Participants were asked what they expect to be the key changes in the financial risk management
profession within the next 2-3 years, and responses yielded the following themes:

More regulation over the next few years (although responses were divided over
whether implementation would increase or decrease in complexity)
Compliance becoming a greater part of risk management
Greater emphasis on stress testing and less on VaR
Increased focus on and sophisticated methodologies applied to liquidity risk
Greater emphasis on data quality and information security

Correlation to the FRM Exam

The Job Task Analysis is an important instrument in the development of the FRM Exam and
provides valuable information for keeping the FRM curriculum aligned with current practices of
financial risk management professionals globally. GARPs FRM Committee updates the curriculum
annually to ensure the program remains reflective of what risk managers need to know, and the
results of the Job Task Analysis provide valuable input for defining the topics on the exam and the
weight of each topic.

JTA | Executive Summary

Creating a culture of
risk awareness
Global Association of
Risk Professionals
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About GARP | GARP enables the risk community to make better informed risk decisions through
creating a culture of risk awareness. We do this by educating and information at all levels, from
those beginning their careers in risk, to those leading risk programs at the largest financial
institutions across the globe, as well as, the regulators that govern them. www.garp.org

2015 Global Association of Risk Professionals. All rights reserved. 7-15