FRM Part 2 Exam Structure

The FRM Part 2 exam builds upon the foundational concepts introduced in FRM Part 1 and requires candidates to apply risk management techniques in practical settings.

• Exam Format:

• Number of Questions: 80 multiple-choice questions
• Duration: 4 hours
• Exam Frequency: Conducted three times a year (May, August, November)
• Focus: More qualitative and application-based compared to Part 1

Unlike FRM Part 1, which emphasizes quantitative methods and risk measurement tools, FRM Part 2 focuses on applying risk management concepts across market risk, credit risk, operational risk, and liquidity management. Many questions require deep conceptual understanding and critical thinking.

Subjects Tested in FRM Part 2

FRM Part 2 consists of six key topics, each focusing on different aspects of financial risk management:

1. Market Risk Measurement and Management (20% Weightage)

• Concepts Covered: Value-at-Risk (VaR), stress testing, liquidity risk, and risk factor models.
• Key Focus: Measuring and managing market risk effectively in financial institutions.

2. Credit Risk Measurement and Management (20% Weightage)

• Concepts Covered: Value-at-Risk (VaR), stress testing, liquidity risk, and risk factor models.
• Key Focus: Measuring and managing market risk effectively in financial institutions.

3. Operational Risk & Resilience (20% Weightage)

• Concepts Covered: Risk governance, regulatory compliance, stress testing, and enterprise risk management.
• Key Focus: Managing operational risks and ensuring resilience within financial institutions.

4. Liquidity and Treasury Risk Management (15% Weightage)

• Concepts Covered: Liquidity risk measurement, asset liquidity, balance sheet management, and funding liquidity.
• Key Focus: Managing liquidity risk and ensuring financial stability.

5. Risk Management & Investment Management (15% Weightage)

• Concepts Covered: Portfolio risk measures, risk budgeting, hedge funds, and asset allocation.
• Key Focus: Applying risk management techniques in investment management.

6. Current Issues in Financial Markets (10% Weightage)

• Concepts Covered: Bank failures, artificial intelligence in risk management, climate risk, cryptocurrency, and blockchain.
• Key Focus: Understanding contemporary financial market trends and their impact on risk management.

Since all topics are interconnected, candidates must grasp how different risk factors interact and affect financial institutions.

Preparation Time for FRM Part 2

On average, candidates spend 200-300 hours preparing for FRM Part 2. The ideal study plan should span 3-5 months, ensuring enough time to master the material.

Key Preparation Strategies:

1. Build on FRM Part 1 Knowledge – Concepts such as VaR, credit risk models, and quantitative risk measures form the foundation for Part 2.
2. Focus on Real-World Applications – Case studies, regulatory updates, and practical risk scenarios are crucial.
3. Practice Past Exam Papers & Mock Tests – Helps with time management and understanding question patterns.
4. Stay Updated on Current Financial Issues – The “Current Issues” section evolves based on market trends, so staying informed is essential.

Level of Difficulty

Many candidates find FRM Part 2 more challenging than Part 1, primarily due to its focus on qualitative analysis and real-world applications. Below are key reasons why:

1. Application of Knowledge

• Unlike Part 1, which is formula-heavy, Part 2 tests how well you can apply risk management principles in real-world scenarios.

2. Real-World Case Studies

• Expect questions that require understanding financial regulations, industry best practices, and market trends.

3. Time Management

• The exam has 80 questions in 4 hours, but questions are more detailed and complex, making time management critical.

To succeed, conceptual clarity and critical thinking are essential.

Cost of FRM Part 2

The cost of FRM Part 2 includes the exam registration fee and study materials. If you’ve already registered for FRM Part 1, you don’t need to pay the enrollment fee again.

Exam Registration Fees:

• Early Registration: $600
• Standard Registration: $800

Additional Study Costs:

• Self-Study Materials: $300 - $600
• Prep Courses:$500 - $1,000

Total costs vary based on your chosen study resources.

FRM Part 1 vs. FRM Part 2: Key Differences

Conclusion

The FRM Part 2 exam is a rigorous test that evaluates a candidate’s ability to apply risk management principles in real-world financial settings. With its emphasis on qualitative analysis, regulatory frameworks, and market trends, FRM Part 2 is considered more challenging than Part 1.

However, with strategic preparation, proper study materials, and consistent practice, candidates can successfully clear FRM Part 2 and take a significant step toward becoming a certified Financial Risk Manager.

Are you ready to take the next step? Start your FRM journey today!

For more insights on finance certifications and exam strategies, visit Charterbuddyy, your go-to resource for finance professionals!