PRM Exam (Profesisonal Risk Manager)

PRM (Professional Risk Manager) is a designation given to any person who has passed a series of examinations conducted by PRMIA (Professional Risk Managers' International Association) and has the necessary qualifications to certify them that they have the requisite knowledge to measure the professional risk for a financial or non-financial body, quantify it and analyze it.

Today, many top organizations look forward to designated professionals who can effectively analyze and manage those risks. PRM designations are one of those credentials which the top financial organizations are looking for. As a result, professionals who earned this designation have been recruited and placed in top organizations with the best finance industry pay scale.

The Professional Risk Manager (PRM) is administered by the Professional Risk Managers International Association (PRMIA) Institute. They offer a specialized service to help you with your career needs from the foundation to the highpoint in the risk management.

Roles

Portfolio Credit Risk Analyst, Enterprise Risk Managers, Risk Advisory Consultants, Operational Risk Analyst, Credit Risk Managers. Please note that if you wish to look at Investment Banking Careers or Equity Research Jobs, then PRM is not the right exam to look at.

PRM Exam

The PRM Program consists of four examinations (Exam I, Exam II, Exam III, and Exam IV)

PRM Exam Dates

You can appear for the PRM exam at any time of the year. PRM Exams are offered at fixed intervals throughout the year.

Scheduling Window

This is a time frame in which you can contact Pearson VUE and fix the date when you will be sitting for your exam.

Testing Window

It is days in which you can sit for your exam.

The Deal

To get a PRM Designation, you must pass all four exams. Either you can complete all exams in one day or in four separate modules, which can be taken in any order cover of up to two years. You need to score a minimum of 60% correct answers to pass for each exam. You can retake any failed exam but must wait 60 days from the date of the failed exam.

Eligibility

• You must hold a membership in PRMIA.
• You should meet minimum experience requirements, which include:
• 4 Years without bachelor degree
• 2 Years with a bachelor degree
• There are no experience requirements for a graduate at school (i.e., MBA, MSF, MQF, etc.) or a holder of other accepted professional designations (CFA exam, CAIA, CQF, etc.)

Exemption: Cross-Over Qualifications

Some great news for those who wish to pursue PRM after becoming a CFA Charter holder. 

• The PRM program recognizes CFA charter holders and associate PRM certificate holders and gives partial credit towards completion of the requirements for the PRM designation. 
• Therefore if you are a CFA charter holder or hold an associate PRM certificate, you can directly apply for Exam III and IV to get the PRM designation.

Exemption: University Accreditation

Suppose you have completed the graduate degree through PRMIA's University Accreditation Program. In that case, you are exempted from PRM Exam I and Exam II, and you can directly appear for Exam III and Exam IV to get the certified PRM designation.

Program Completion Criteria

You need to pass all four examinations, need to hold a membership in PRMIA, and are required to meet the minimum experience requirements. You can take the exams in any order over up to two years.

Recommended Study Hours

If you appear for the PRM examination, you must give a minimum of 100-150 hours to prepare for Exam I, II & III.

For Exam IV, you can give a minimum of 50 hours of preparation in which you need to dedicate 70% of your time to reading various case studies and the rest 30% to practice the test papers.

What do you earn?

The PRMTM designation

You might wonder if PRM is worth the effort, time, and money. After completing the program, you might draw a quick comparison of what you invest and finally get in return. Below, we have listed down the main reasons as to why you should pursue PRM –

• PRM is the most recognized certification course globally for financial risk managers.
• PRM program is useful in Portfolio Credit Risk Analyst, Enterprise Risk Managers, Risk Advisory Consultants, Operational Risk Analyst, Credit Risk Managers, etc.
• Employers consider PRM Designated individual’s expertise in risk management because the skills of PRM holder is robust and vital to their business.
• The lucrative working positions for PRM holders include Chief Risk Officer, Senior Risk Analyst, Head of Operational Risk, and Director.

The exams conducted by PRMIA are computer-based, consisting of multiple-choice questions that are drawn randomly from the exam database according to the syllabus order and weightings. It helps PRMIA to examine the accurate details of questions by administering and evaluating the time taken by candidates to answer each question.

The following table showcases the details of PRM exams:

 Let’s now look at the high-level subject matter breakdown for each individual exam.

Format of PRM Exam I

Considering the number of questions you need to attempt in a given time, the PRM Level I exam contains a total of 36 questions that need to be answered in 2 hours. The questions are MCQs selected randomly from the syllabus as per the weightage requirement, and the exam doesn't have any negative marking. You must score a minimum of 60% to clear, and the exam can be taken only in the English language. It is an online exam conducted in more than 165 countries with nearly 5000 locations.

source - PRMIA

• Finance Theory - This section carries 36% weightage, and you will study about the risk and its aversion, CAPM, Basics of capital structure, Valuation of forwarding contracts, and Options Pricing.
• Financial Instruments - This section carries 36% weightage, and hence you are required to have descriptive and pricing knowledge on the various financial instruments like Bonds, Futures and Forwards, Swaps, Credit Derivatives, etc.
•  Financial Markets - This section carries 28% weightage. For this section, you should have knowledge of Money, Bond, Forex, Stock, Futures, Commodities, and Energy Markets.

The format of PRM Exam II

The total number of questions in Exam II is 24, for which you will get 2 hours’ time. And you need to score a minimum of 60% to clear this exam. There is no negative marking.

source: PRM

• Mathematical Foundation – This section carries 4% weightage, and it deals with the mathematical symbols, rules, sequences, series, exponents and logarithmic concepts, various functions, and graphs.
• Descriptive Statistics – This section carries 8% weightage, and it includes the moments of a distribution, bivariate data, measures of dispersion.
• Calculus – This section carries 21% weightage, and it includes differential calculus, integral calculus, applications of second derivatives, optimization, etc.
• Linear Mathematics & Matrix Algebra – This section carries 21% weightage, including matrix algebra, applications, and quadratic forms.
• Probability Theory – This section carries 25% weightage, including probability theory definitions and rules and distribution concepts.
• Financial Theory - This section carries 13% weightage, and it includes the simple, multiple linear regression, hypothesis testing, maximum likelihood estimation.
• Numerical Methods - This section carries 8% weightage, and it includes numerical methods for valuing options, solving equations, etc.

Format of PRM Exam III

The total number of questions in this exam is 60, and the total time duration is 3 hours, and you need to score a minimum of 60%, and there is no negative marking.

source: PRM

• Risk Management Frameworks - This section carries 11% weightage, and it includes knowledge on the area of risk governance, risk management frameworks, etc.
• Operational Risk - This section carries 16% weightage, and it includes risk assessment, risk information, risk modeling, insurance mitigation.
• Credit Risk - This section carries 29% weightage, and it includes the knowledge on classic credit products, classic credit life cycle, classic credit risk methodology, credit derivatives, and securitization, modern credit risk modeling, and credit portfolio management.
• Counterparty Credit Risk - This section carries 8% weightage, and it deals with the basics of counterparty risk, risk mitigation, credit valuation adjustment (CVA), CVA related aspects, and managing counterparty risk.
• Market Risk - This section carries 23% weightage, and it includes market risk governance, market risk measurement, and management, market risk in the trading book, commodities market risk management, market risk stress testing.
• Asset Liability Management, Liquidity Risk Management & Funds Transfer Pricing - This section carries 18% weightage, and it includes interest rate risk, liquidity risk, Introduction to ALM, balance sheet management, Funds Transfer Pricing Governance, Management, Methods, and Historical Development.

Format of PRM Exam IV

This exam consists of 24 multiple choice questions, and the time duration for this exam is 1 hour. To clear this exam, you need to score 60%, and there is no negative marking.

source: PRMIA

Case Studies – This section carries 63% weightage, and for this section, you will be required to study the various cases like world com, barings, LTCM, NAB-FX options, bankers trust, Washington mutual, northern rock, etc.

Standards of Practice, Governance & Ethics - This section carries 37% weightage, and this includes a study on PRMIA Bylaws, Governance Principles, Standards of Best Practice, Conduct and Ethics, Group of Thirty Derivatives Best Practices.

Source: PRMIA https://www.prmia.org/

To take the PRM exam, you must purchase a voucher for your exam schedule ticket with the testing center, Pearson VUE. The PRM exam comprises four exams. Therefore, PRMIA sells four exam vouchers and the required study material, i.e., the PRM Handbook (printed or digital), as an exam voucher bundle.

Below mentioned are the examination fees and Handbook cost for PRM Exams (1, 2, 3 & 4):

PRM Terms & Conditions*plus shipping charges, which vary by geographic location

• For sustaining members of PRMIA 10% discount is applicable. To claim this discount, you must register directly with PRMIA at prmia.org.
• Discounts are also provided to a group of 10 or more by contacting support@prmia.org.
• If you are exempted from one or more exams, you can still o purchase a bundle package.
• Exam vouchers are not refundable.
• Vouchers will expire after 30-36 months of receipt, and if the voucher expires before use, then you will need to purchase a new voucher.
• After purchase 4 voucher codes will be delivered to you via e-mail and also available in your 'Product Keys' tab within your PRMIA Profile.

• PRM results are usually announced after 15 business days of your test date.
• PRM Exams are graded digitally.
• The results can be accessed by signing in to your PRMIA account and going to the 'Exams Tab' in your 'PRMIA Profile.'

source: PRMIA

The above diagram depicts the range of the passing rate of PRM Exams. If we observe keenly, there is no much difference in passing rates of Exam I, II & III, but as we see, the passing rate of Exam IV is much higher compared to other Exams I, II & III. If you are not sure about which exams need to appear first, then you can go for first Exam IV and then later can appear for Exam I & III as you can observe both the exams has nearly 60% of passing rates and then you can take time to prepare well for Exam II and appear for it within a period of two years.

Merely studying for the exams and practicing the sample exam papers will not be sufficient for you to crack them. You will be required to keep yourself updated by reading industry magazines, company policies and procedures, reading risk reports, attending risk management conferences, academic journals, PRMIA chapter meetings, etc. These activities will prepare you well for the PRM exams.

PRMIA Handbook Series

• The Professional Risk Manager Handbook Series (Latest Edition) is the required study resource for the PRM exams.
• You can purchase these study resources by purchasing the voucher bundle from the PRMIA website.
• PRMIA provides study guides and training courses (sample question papers), which will be helpful for you to prepare for them.
• The PRM handbook series and supporting materials PRMIA are designed for self-study.

• The Professional Risk Manager Handbook Series (Latest Edition) is the required study resource for the PRM exams.
• You can purchase this study resources by purchasing the voucher bundle from the PRMIA website.
• PRMIA provides the Study guides and training courses (Sample Question Papers), which will be helpful for you to prepare for the PRM exams.
• The PRM Handbook Series and supporting materials provided by PRMIA are designed for self-study.

PRM Handbook Series Details

How much time do I need to prepare for PRM Exams?

• Preparing for PRM exams will greatly differ according to the knowledge, skills, and understanding of the subject matter before your self-study.
• The study time will also vary according to your ability to commit dedication for uninterrupted time to studies and other factors.
• Overall, if you are preparing for the PRM certification examinations, you will be required to allocate 8 – 9 hours per week for three months for each exam.
• If you have a busy schedule, you can take the required exams at your own pace, in any order, over up to two years. Each exam differs in length from one to two hours, so you can take 2-3 exams at once and save your time for the difficult exam.
• Once you are comfortable and ready, it's time for you to register for the exam.

Testing Strategies

The PRM exams consist of multiple-choice questions (MCQs), and there is no negative marking for incorrect answers. However, keep in mind that it is extremely important to finish the exam in the time allotted. To finish the exam in the allotted time frame follows the below steps:

• Do not linger over questions longer than is sensible.
• If the exam has 36 questions in 120 minutes, do not spend three minutes per question. 
• Go through all the questions and answer the ones you find easier or sure enough to be correct first. 
• Divide the remaining questions in the time that remains and proceed accordingly. 
• If you have extra time at the end of the exam, you can always go back and review the answers. If you have not answered any questions, select the best answer you can.
• Be sure that you have answered all the questions at the end of the exam.

Usage of the Calculator

• At the exam center of PRM, you will have online access to the Texas Instrument TI308XS calculator.
• You can get familiarized by purchasing the handheld version of this Texas instrument to better practice using it.
• No other such materials are allowed in the examination room.

Suppose you had appeared or taken one or more 2015 edition PRM exams. In that case, you need to additionally maintain the PRM designation as these requirements have been made essential to ensure your commitment towards a risk knowledge base. Listed below are the things which the PRM holder needs to take care of:

• You need to hold a PRMIA sustaining membership every year from the day you obtain your designation.
• Complete 20 Continuing Risk Learning Credits (CRL). Each calendar starts with the calendar year after you obtain your PRM designation.
• CRL credits can be obtained by attending webinars, training courses, event presentations, and articles.
• If you are a PRM holder and fail to submit the 20 CRL credits or maintain a sustaining membership, then your PRM Designation will lapse.
• If the PRM designation lapses for more than three years in a row, you will need to re-write PRM Exam III and pay $400 as a penalty fee to regain your PRM designation.

PRMIA provides scholarship opportunities to the members of the low-income groups to support their study for risk management. Many aspirants from the low-income groups have also appeared for the PRM designation due to scholarship exams. To qualify for PRMIA institute scholarships:

• Members must have an annual income of less than USD 25,000.
• Members should not have their professional development expenses reimbursed by a third party.
• Members can claim scholarship discounts while registering for the exams.

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