Financial Risk: Manage it Strategically

Financial Risk Management is the process of dealing with the uncertainties of the financial instruments. Financial instruments generally face two types of risk- market risk and credit risk. These risks are basically because of the volatility of the financial markets and instruments.

Financial Risk Management involves:                                                                                        

- Identifying the source of the risk

- Measure the source of risk, and

- Address the risk

Managing financial risk provides the organization with competitive advantage over other organizations as it enables the organizations to avoid any future financial loss. Financial Risk Managers are entrusted with this task of hedging any form of financial risk.

Financial risks generally, arise due to the volatility in the financial instruments and in the financial market. There are three main sources of financial risks:

- Exposure to changes in market prices

- Other organizations’ actions and transactions

- Internal actions or failures of organizations particularly people, system and processes.

According to Wikipedia Financial Risk Management is defined as “Financial Risk Management is the practice of creating economic value in a firm by using financial instruments to manage exposure to risk particularly credit risk and market risk. Financial Risk is basically of two types:

- Qualitative

- Quantitative

It mainly, focuses on when and how to mitigate and hedge financial risk. Financial risk management involves using financial instruments to manage exposure to risk. It involves making a decision regarding which risks are acceptable and which are not. Organizations manage financial risk using a variety of strategies and products. It is said that risks do not occur due to isolated factors rather they happen because of the exposure to many risk causing factors simultaneously.

The designation of Financial Risk Managers is an international professional certification from Global Association of Risk Professionals. To be awarded this certification you are required to successfully complete the two-part rigorous examination which covers all the major topics of financial risk management.

A financial Risk Manager’s job involves analyzing, assessing or controlling credit risk, market risk and liquidity risk. It also involves managing non-market related risks.

Passing scores on both the Part I and Part II exams, as well as a minimum of two years’ full-time work experience in financial risk management related positions including portfolio management, risk consulting, and other fields is a pre-requisite for getting this designation.

The observation of experts of EduKart.com shows that clearing the FRM examination isn’t a very easy task. GARP has made it a rigorously practice oriented test. The questions are structured in a way that financial risk managers face. In the past years the pass percentage has been around 40-50%. Proper guidance is therefore, imperative for succeeding in these exams. EduKart.com in association with KESDEE is providing online preparatory material for the two parts of FRM examination. It is strictly based on the examination structure and every topic has been included in the course curriculum.

For more information visit:

EduKart.com Course in FRM (Part 1) Preparation

EduKart.com Course in FRM (Part 2) Preparation