Thread by @SAH16928046

Why is Financial Risk Management important for students to select as an elective in a Banking, or Finance or Investments Specialization Pathway?
@GARP_Risk
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FRM became popular during the 1980s when some top Wall - Street Banks hired quants to develop Summary Portfolio Metrics and reports on a day-end basis. E.g. the techniques pioneered by JP Morgan, LTCM and other top banks paved the way forward.

The credit for the development and emergence of this new subject area from within the literary domains of both Financial Economics & #Actuarial Science that has revolutionized decision-making, problem-solving and structuring methods across industries goes to working professionals

You may disagree, but that is my opinion.
Applied Economists and Actuaries contributed to the subject in different contexts.

Read the evolution of FRM Modelling History in the context of FIs such as IBs on Wall Street, by understanding VaR Model Applications as given below =>

RiskMetrics - Value-at-Risk: Theory and Practice
value-at-risk.net

Initially, the FRM had a narrower definition at banks and Insurance Companies.
•At the Retail Banks, the Risk jobs were confined within two areas: Credit and Audit.
•At Insurance esp, Life Insurance, the roles of the risk were managed by the Actuarial Department and Audit.

Nevertheless, with the focus shifting from Credit to other forms of risk(thanks to the Basel /Solvency Capital Standards Guidelines I and later II), the significance of FRM significantly increased!

Risk got divided into silos due to additional need for specialization, a desire to understand and communicate using a tailored taxonomy and an appreciation of the rapidly changing market/ product hedging markets and their dynamics.

Hence, with a general FRM Certification/ Qualification such as FRM / PRM/ CERA offered by various professional bodies, the financial market professionals

are now more equipped to deal with Financial (Enterprise / Corporate Risk) Management using a much broader definition of the subject.

An FRM certified professional and/or a degree holder can apply common concepts and methodologies to prevent risk cascading across the financial services industry, using common incident communications and escalation strategies.

Also, some credit must go to FRM Academicians and Professionals, who also contributed to the overall quantification of immeasurable and non-quantifiable risks such as Operational Risks, Legal Risks, & other PEST Risks.

Basel II Operational Risk Models not only created awareness within the financial services industry but also changed the entire Operational risk modelling landscape across various vertical industries.

Today there is a philosophy and methodology in place to measure and model the Hard and Soft Operational Risk Sample Data Sets, which was previously ignored as being insignificant, by the Internal auditors, due to its immateriality and scope.

Hence, the modern FRM unit is made up of various specialized silos! And this wasn't the case a few decades before.

Thus, the professional and academic field of FRM has evolved considerably and now stands as the modern pillar of Finance adding to the existing pillars of Corporate Finance and Asset Pricing, drawing notable literature and references from both the latter and the former.

FRM should be recognized as a standard risk qualification and the professionals engaged in financial risk management

And FRM Professionals and Scholars should get due recognition as the subject expert/s and specialist/s, who are contributing to models, concepts and theories across various interacting fields, within the world of academia accordingly.

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