FRAC Body of Knowledge (BOK)
The Financial Risk Analyst for Corporation (FRAC) Certification Examination is built on a formally established FRAC Body of Knowledge (BOK) the definitive framework that governs what is assessed, how it is assessed, and why it matters in real corporate decision-making.
The BOK ensures that the FRAC examination is structured, objective, and professionally relevant, measuring applied financial risk competence rather than academic knowledge.
What the FRAC Body of Knowledge Defines
The FRAC BOK establishes the required professional capability standard for certified corporate financial risk analysts. It defines the scope, depth, and level of judgment expected when managing financial risk in corporate environments.
Practical Application
Rather than focusing on isolated concepts, the BOK reflects how financial risk is addressed in practice across treasury, finance, risk, and strategic functions.
Market Conditions
Addresses risk management under varying market conditions, capital structures, and regulatory constraints relevant to corporate environments.
Professional Judgment
Evaluates the ability to apply disciplined, professional judgment under uncertainty rather than rewarding rote memorization.
Competency Architecture: From Domain to Decision
The FRAC Examination Curriculum follows a three-tier competency architecture
Domains
Represent core areas of corporate financial risk responsibility and accountability
Subdomains
Translate each domain into focused analytical and risk-management themes
Competency Statements
Define specific professional actions analyzing exposures, evaluating risk impact, and exercising sound judgment
FRAC Topic Weighting
Risk-based weighting ensures the examination prioritizes what truly matters in practice
FRAC Body of Knowledge Framework
The following Body of Knowledge defines the complete competency scope assessed in the FRAC Certification Examination.
Sub Domain 1.1
Understand Financial Risk in a Corporate Context
Analyze financial risk within the context of corporate operations, strategy, and performance objectives.
Differentiate and classify the major types of financial risk faced by corporations.
Assess how non-financial risks translate into financial risk exposure for corporations.
Evaluate the impact of financial risk on corporate performance, sustainability, and value creation.
Distinguish between financial risk arising from business activities and risk arising from financing decisions.
Analyze the opportunity cost associated with financial risk and risk-mitigation decisions.
Sub Domain 2.1
Understanding Market Risk
Assess the impact of market risk on manufacturing and real-sector companies.
Analyze corporate exposure to commodity markets and commodity price movements.
Evaluate the financial impact of commodity price volatility on corporate cash flows and profitability.
Analyze interest rate risk arising from corporate financing structures and repricing mechanisms.
Assess the impact of inflation risk on corporate costs, revenues, and profitability.
Evaluate foreign exchange risk arising from corporate operations, transactions, and financing.
Analyze financial risk arising from asset value volatility affecting corporate performance or valuation.
Evaluate exposure to equity price risk in corporate investment and financing structure.
Assess financial risk arising from volatility in the prices of other asset types.
Analyze correlation and interaction between different types of financial risk.
Sub Domain 3.1
Managing Market Risk Through Hedging
Analyze the objectives and limitations of hedging as a corporate risk management strategy.
Evaluate the use of derivative contracts to hedge market risk exposures.
Assess derivative-like contractual and financing structures used for hedging purposes.
Distinguish between on-balance sheet and off-balance sheet hedging approaches.
Evaluate the use of freight forward agreements as hedging instruments in logistics and commodity exposure.
Analyze the characteristics and applications of forward and futures instruments.
Evaluate the use of option instruments in managing asymmetric risk exposures.
Distinguish between option-based risk transfer and insurance-based risk transfer.
Analyze the structure and risk implications of swap instruments.
Evaluate the application of commodity swaps for managing price risk.
Assess interest rate swaps as tools for managing borrowing and funding risk.
Evaluate currency swaps for managing foreign exchange exposure.
Describe the role of exotic derivatives in corporate hedging and their key structural features.
Describe structured products used for hedging and their general risk–return characteristics.
Assess the risks arising from hedging activities and risk mitigation effectiveness.
Assess the effectiveness of natural hedging as a market risk mitigation strategy.
Differentiate various types of foreign exchange risk affecting corporate operations.
Analyze net open position as a measure of foreign exchange exposure.
Evaluate foreign exchange risk arising from positive and negative exposures.
Assess on-balance sheet and off-balance sheet techniques to manage net open positions.
Evaluate interest rate risk associated with corporate borrowing structures.
Analyze asset and liability duration to assess interest rate sensitivity.
Evaluate market risk mitigation through revenue and cost structure management.
Assess operational strategies for managing commodity risk.
Evaluate diversification benefits from investing in low-correlation business lines.
Analyze sources and implications of business volatility.
Identify embedded option rights within business and commercial contracts.
Sub Domain 5.1
Understand Credit Risk
Differentiate the various types of credit risk arising in corporate activities.
Assess credit risk associated with accounts receivable and customer payment behavior.
Analyze credit risk using collection period and days-receivable metrics.
Evaluate the risks associated with using receivables as unsecured financing.
Assess credit risk arising from corporate borrowing and lending activities.
Analyze credit risk embedded in contractual arrangements and enforceable obligations.
Explain how credit risk can be transformed into operational risk.
Explain the purpose and mechanisms of credit derivatives in managing counterparty credit exposure.
Analyze credit risk embedded in contracts with derivative-like characteristics.
Evaluate the impact of credit risk on corporate value and financial sustainability.
Explain how to identify and manage risks arising from own credit deterioration.
Analyze potential sources of credit risk within corporate activities.
Calculate credit risk arising from trade receivables and customer credit exposure.
Assess collection period and days sales outstanding as indicators of credit risk.
Evaluate receivables aging analysis to assess default and delay risk.
Analyze exposure, expected loss, and unexpected loss in corporate credit risk.
Calculate expected loss and unexpected loss for credit assessment.
Assess pricing-based approaches to establishing credit loss provisions.
Evaluate the use of enforceable contracts to mitigate credit risk.
Analyze the role of collateral in reducing credit exposure.
Differentiate various types of collateral used in credit risk mitigation.
Assess credit risk mitigation through loan-to-value structures.
Distinguish credit risk from market risk in corporate risk management.
Evaluate the use of letters of credit as a trade finance risk management strategy.
Assess the legal transformation of credit risk through contractual enforcement.
Sub Domain 7.1
Liquidity and Cash Flow Risk Management
Analyze why liquidity risk becomes a critical issue for many corporations.
Assess working capital and the cash conversion cycle from a liquidity risk perspective.
Analyze timing differences in accrual-based accounting and their impact on liquidity risk.
Evaluate cash inflows and outflows using cash flow statement analysis.
Distinguish between high-quality and low-quality cash flows and their liquidity implications.
Assess liquidity risk arising from the composition and structure of corporate assets.
Evaluate liquidity risk arising from corporate funding and financing structures.
Analyze short-term versus long-term trade-offs in liquidity management decisions.
Evaluate the impact of excess liquidity versus insufficient liquidity on enterprise value.
Sub Domain 7.2
Managing Liquidity and Cash Flow Risk for Corporations
Analyze asset-liability management as a framework for managing liquidity risk.
Evaluate cash flow bucketing as a liquidity risk analysis tool.
Analyze cash flow maturity gaps using cash bucket methodologies.
Evaluate liquidity and solvency ratios in assessing corporate financial resilience.
Assess liquidity management strategies in disaster recovery scenarios.
Evaluate stress testing techniques for liquidity and sensitivity analysis.
Assess strategies for managing corporate cash reserves.
Evaluate the governance role of corporate treasury and ALCO structures.
Analyze value at risk and cash flow at risk concepts in liquidity and risk assessment.
Sub Domain 8.1
Enterprise Financial Risk Diagnosis and Failure Analysis
Analyze financial risks arising from business and operational failure.
Assess financial risk resulting from production process failures.
Evaluate financial risk arising from supply chain disruptions.
Assess financial risk arising from pricing decision failures.
Evaluate financial risk associated with export–import activities.
Assess financial risk related to unsuccessful new product launches.
Differentiate various types of corporate investment and their risk profiles.
Evaluate risks associated with start-up investments that have not generated profits.
Assess risks related to investments in fixed assets.
Evaluate risks associated with investments in intangible assets.
Analyze project feasibility concepts with respect to interest rate risk.
Assess liquidity risk in project management contexts.
Analyze financial risk using financial statements and financial projections.
Evaluate risk indicators through income statement analysis.
Assess risk exposure through balance sheet analysis.
Evaluate risk exposure through cash flow statement analysis.
Identify inaccuracies in income statements of other companies.
Identify inaccuracies in balance sheets of other companies.
Identify inaccuracies in cash flow statements of other companies.
Evaluate financial ratio analysis and its implications for risk management.
Conduct comprehensive financial statement analysis for risk identification.
Perform comprehensive risk analysis based on financial statements.