Complete Beginner’s Guide to PRM Exam (Profesisonal Risk Manager)

PRM (Professional Risk Manager) is one of the risk professional certifications not many are aware of. You may have heard a lot about FRM (Financial Risk Management), however, PRM is also one of the finest risk certifications that one can also opt for.

Today many top organizations are looking forward to the professionals who are designated with such credentials and can analyze and manage those risks effectively. And PRM Designation is one of those credentials which the top financial organizations are looking for. Professionals who earned this designation have been recruited and placed in top organizations and with the best pay-scale in the finance industry.

So in this article, I aim to brief you on the nuts & bolts on PRM Examination, which will include:

• About PRM Program
• Why Pursue PRM Exam?
• PRM Exam Format
• PRM Exam Fees
• PRM Results & Passing Rates
• How to Prepare for PRM Exams
• How to increase the chances of clearing the PRM Exams?
• How to Maintain your PRM Designation?
• PRM Scholarship Opportunities

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About PRM Exam

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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 profession.

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

Scheduling Window	Testing Window
January 1 – March 15, 2019	February 18 – March 15, 2019
March 16 – June 21, 2019	May 27 – June 21, 2019
June 22 – September 13, 2019	August 19 – September 13, 2019
September 14 – December 20, 2019	November 18 – December 20, 2019
January 1 – March 13, 2020	February 17 – March 13, 2020
March 14 – June 19, 2020	May 25 – June 19, 2020
June 20 – September 11, 2020	August 17 – September 11, 2020
September 12 – December 18, 2020	November 16 – December 18, 2020

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 over a period 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 if no bachelor degree
• 2 Years if bachelor degree
• No experience requirements if a graduate school (i.e. MBA, MSF, MQF, etc.) or 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 they are 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 Associate PRM Certificate then you can directly apply for Exam III and IV to get the PRM Designation.

Exemption: University Accreditation

If in case you have completed the graduate degree through PRMIA’s University Accreditation Program, then also you are exempt from PRM Exam I and Exam II, and you can directly appear for Exam III and Exam IV in order to get the certified PRM designation.

Program Completion Criteria

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

Recommended Study Hours

If you are appearing for the PRM examination, you are required to give a minimum of 100-150 hours for the preparation of 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 timing in reading various case studies and rest 30% in practicing test papers.

What do you earn?

PRM^TM Designation

Why Pursue PRM Exam?

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You could wonder is PRM really worth the efforts, time and money. And surely you must have a good thought over this to do a quick comparison between what you invest and finally get in return after the completion of the program. Below I have listed down the main reasons 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.

PRM Exam Format

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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.

Following table showcases the details of PRM exams:

Exam	Exam Name	No. of Questions	Time Allowed
I	Finance Theory, Financial Instruments, and Markets	36	2 hours
II	Mathematical Foundations of Risk Measurement	24	2 hours
III	Risk Management Practices	60	3 hours
IV	Case Studies, PRMIA Standards of Best Practice, Conduct and Ethics, Bylaws	24	1 hour

 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 needs to be answered in 2 hours’ time. The questions are MCQs and are selected randomly from the syllabus as per weightage requirement and the exam doesn’t have any negative marking. You are required to score a minimum of 60% to clear the exam and the exam can be taken only in the English Language. It is an online exam and conducted in more than 165 countries consisting of 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 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 and it includes matrix algebra, its applications, and quadratic forms.
• Probability Theory – This section carries 25% weightage and it includes probability theory definitions and rules, 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 60% and there is no negative marking.

 

 

 

 

 

 

 

source: PRM

• Risk Management Frameworks – This section carries 11% weightage and it includes the 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 http://www.prmia.org/prm-exam/becoming-certified

PRM Examination Fees

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In order to take the PRM exam, you must purchase a voucher, which is your ticket to schedule your exam with the testing center, Pearson VUE. The PRM exam comprises of 4 exams. PRMIA sells 4 exam vouchers along with the required study material i.e. the PRM Handbook (printed and/or digital), as an exam voucher bundle.

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

PRM Exam Voucher Bundle	Price	C-Suite/Sustainer Price	Contributor Price
4 PRM Exam Vouchers + Digital PRM Handbook	$1200	$1080	$1140
4 PRM Exam Vouchers + Printed PRM Handbook	$1350	$1251	$1282
4 PRM Exam Vouchers + Digital + Printed PRM Handbook	$1400	$1260	$1330

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 being exempt from one or more exams, still you will have to 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 and PRM Passing Rates

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• 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 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 than 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.

How to Prepare for PRM Exams?

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

Exam	Exam Name	PRM Handbook Volume/Resources
I	Finance Theory, Financial Instruments & Markets	Volume I: Book 1 Financial Theory and application volume I: Book 2 Financial InstrumentsVolume I: Book 3 Financial Markets
II	Mathematical Foundations of Risk Measurement	Volume II: Mathematical Foundations of Risk Measurement
III	Risk Management Practices	Volume III: Book 1 Risk Management Frameworks and Operational RiskVolume III: Book 2 Credit Risk and Counterparty Credit RiskVolume III: Book 3 Market Risk, Asset Liability Management and Funds Transfer Pricing
IV	Case Studies, PRMIA Standards of Best Practice, Conduct and Ethics, Bylaws	Case Studies, PRMIA Standards of Best Practice, Conduct and Ethics, Bylaws

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 prior to your self-study.
• And the study time will also vary according to your ability to commit dedication for uninterrupted time to studies as well as for other factors too.
• Over-all if you are preparing for the PRM certification examinations you will be required to allocate 8 – 9 hours per week for 3 months for each exam.
• If in case you have a busy schedule, you can take the required exams at your own pace, in any order, over a period of up to two years. As each exam differs in length from one to two hours, so you can take 2-3 exams at once and save your time the time for the difficult exam.
• Once you are comfortable with readiness, it’s time for you to register for the exam.

How to increase the chances of clearing the PRM exams?

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Testing Strategies

The PRM exams consist of multiple-choice questions (MCQs) and there is no negative marking for incorrect answers. Keep in mind that it is extremely important to finish the exam in the time allotted. In order 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 longer than three minutes for per question
• Go through all the questions and answer the ones first which you find easier or sure enough to be correct.
• Divide the remaining questions by the time remaining and proceed with it.
• At the end of the exam, if you have extra time you can always go back and review the answers. And in case you have not answered the questions, select the best answer you can ignoring the obviously wrong.
• Be absolutely 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 familiarize by purchasing the handheld version of this Texas instrument in order to get a better practice of using it.
• No other as such materials are allowed in the examination room

How to Maintain your PRM Designation?

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If you had appeared or taken one or more 2015 edition PRM exams, you need to take care of additional maintenance for PRM designation. As these requirements have been made essential to ensure the commitment towards risk knowledge base current. Listed below are the things which the PRM holder needs to take care of:

• Need to hold a PRMIA Sustaining Membership every year from the day you obtain your PRM designation.
• Complete 20 Continuing Risk Learning Credits (CRL) each calendar starting 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 being PRM holder you fail to submit 20 CRL credits or maintain a sustaining membership, then your PRM Designation will be a lapse.
• In case the PRM Designation lapses for more than 3 years in a row than you will need to re-write PRM Exam III and also pay a $400 as a penalty fee to regain your PRM Designation.

PRM Scholarship Opportunities

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PRMIA provides scholarship opportunities to the members of the low-income groups in order to support their study for risk management. Today many aspirants from the low-income groups has also appeared for the PRM designation due to scholarship exams. In order 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.

Other useful articles

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• FRM vs PRM
• CFA vs FRM
• CRM vs PRM

What next?

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If you learned something new or enjoyed the post, please leave a comment below. Let me know what you think. Many thanks and take care. Happy Learning!