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

Bank
0% 10% 20% 30% 40%
Purpose & Method
Asset
management
The purpose of the FRM Job Task Analysis is to better
Consulting understand the daily reality of a financial risk manager in
company
order to keep the FRM curriculum consistent
Insurance
company with this reality.
Broker/Dealer
An expert panel of FRMs delineated the major
Regulatory responsibilities of a financial risk management
agency professional and the tasks associated with each of these
major responsibilities. The panel also outlined the
Participants by Current Position Description knowledge and skills needed to perform the tasks and
responsibilities that they had identified. Several additional
0% 10% 20% 30% 40% 50% 60%
rounds of vetting and refinement took place until a final
Perform Risk survey instrument was created and distributed to the
Management
Tasks
global risk community.
Work with risk
professionals
Over the course of three months, more than 1,400 risk
Supervise risk professionals (over 1,100 were FRMs) responded to the
professionals
survey. Respondents came from over 90 countries around
Teach risk
the world and work in a range of financial services indus-
professionals tries. The majority directly perform risk management tasks
and hold at least a masters degree.

2 JTA | Executive Summary

Findings

3
Findings

4
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.

5 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 val-
idation 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

6 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.

7 JTA | Executive Summary

 Creating a culture of risk awareness

Global Association of Risk Professionals

111 Town Square Place

14th Floor
Jersey City, New Jersey 07310
U.S.A.
+ 1 201.719.7210

2nd Floor
Bengal Wing
9A Devonshire Square
London, EC2M 4YN
U.K.
+ 44 (0) 20 7397 9630

www.garp.org

About GARP | The Global Association of Risk Professionals (GARP) is a not-for-profit global membership organization dedicated to
preparing professionals and organizations to make better informed risk decisions. Membership represents over 150,000 risk man-
agement practitioners and researchers from banks, investment management firms, government agencies, academic institutions, and
corporations from more than 195 countries and territories. GARP administers the Financial Risk Manager (FRM) and the Energy Risk
Professional (ERP) exams; certifications recognized by risk professionals worldwide. GARP also helps advance the role of risk man-

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