DEFINITION of Professional Risk Manager (PRM)

A professional risk manager is a designation awarded by the Professional Risk Managers' International Association. The organization grants the designation to financial risk managers who pass four exams covering financial theory; financial instruments and markets; mathematical foundations of risk measurement; risk management practices; and case studies, best practices, conduct, ethics, and bylaws.

Understanding the Professional Risk Manager (PRM)

The study program to become a professional risk manager covers the financial theory behind risk management, risk measurement, option theory, financial instruments, trading markets, best practices, and historical risk-management failures. Individuals with the professional risk manager designation may work as enterprise risk managers, operational risk analysts, credit risk managers, risk advisory consultants, and more. Types of businesses that hire professional risk managers include insurance companies, asset managers, hedge funds, consulting firms, and investment banks.

Testing to Become a PRM

Professional risk manager exams are computer-based, and the questions are all multiple choice. The exams can be taken in any order and must be completed over a period of up to two years. They are offered during four testing windows per year, each of three weeks. The program recognizes other professional designations and gives partial credit to "crossover" candidates, as well as to graduates of select university programs.

Defining Risk Management

Risk management is the identification, evaluation, and prioritization of risks, followed by coordinated and economical application of resources to minimize, monitor, and control the probability or impact of those risks.

Risks can come from various sources including uncertainty in financial markets, threats from project failures (at any phase in design, development, production, or sustainment life cycles), legal liabilities, credit risk, accidents, natural causes and disasters, deliberate attack from an adversary, or unpredictable events.

Defining Financial Risk Management

Financial risk management is the practice of using financial instruments to manage exposure to various types of risk: operational, credit, market, foreign exchange, shape, volatility, liquidity, inflation, business, legal, reputational, and sector risks, etc. Like general risk management, financial risk management requires identifying risk sources, measuring them, and making plans to address them.

Financial risk management can be qualitative and quantitative. As a specialization of risk management, financial risk management focuses on when and how to use financial instruments to hedge costly exposures to risk.

International banks generally adopt the Basel Accords for tracking, reporting, and exposing operational, credit, and market risks.

The Professional Risk Managers’ International Association

The Professional Risk Managers’ International Association is a nonprofit association founded in 2002. It is governed by a board of directors elected by its global membership and is represented by 46 chapters in major cities around the world.