Global Association of Risk Professionals (GARP)
is a web-based organization that claims to represent the
management community. In non-profit circles, GARP might be euphemistically called a for-profit-non-profit. Through its
official-looking website and numerous spam e-mails, it peddles a host of products and services—conferences, DVD's, a certification,
training, employment services, digital downloads, etc. People wonder
whose pockets all the money ends up in.
GARP has been rocked by scandal, but the website stayed up through it
all, and the spam e-mails were only briefly interrupted. They target newcomers to the
risk management field. People who are unaware of the organization's
checkered past can easily spend $1,000 on GARP's dubious products before
learning the truth.
GARP was launched by a pair of
and Lev Borodovsky, in 1996. A few months later, their fledgling
initiative was described in the December issue of Derivatives
Strategy magazine (now defunct)
There is a new GARP on the block, one not born of the
famous John Irving novel. This one is a grassroots organization of risk
managers with the full name of Global Association of Risk Professionals.
GARP is the brainchild of two individuals at dealer firms, Marc Lore and
Lev Borodovsky, who with some colleagues used to meet weekly at a New
York pub to talk shop—recruitment, systems, etc. Four months ago they
decided to give themselves a formal name and organization that was
launched on the Internet (www.chadmarc.com/garp). By early November,
after a few thousand hits, GARP boasted more than 250 signed-on members
from 23 countries. "It took off way beyond our wildest expectations,"
says Borodovsky ...
The Internet was taking off in 1996. Millions of people
were discovering browsers and hyperlinked webpages for the first time.
Some were risk professionals, and GARP's website was one of the few
websites devoted to risk management at the time. Anyone who entered
their contact information on the website was deemed a member, so
membership rapidly grew.
Volunteers stepped forward to be regional directors,
establishing local chapters around
the globe. These provided grassroots programs for local members,
including meetings where people could listen to speakers and network.
GARP had little need for money. Other than the website,
there wasn't much overhead, and work was performed by volunteers. Lore and Borodovsky raised money by selling corporate memberships, which allowed
vendors to be listed as "recommended vendors" on the GARP website. They
sold books on the website through Amazon's associates program and other
channels. They also sold banner advertising on their website.
In 1997, Lore and Borodovsky launched a "professional
certification" called Financial Risk Manager (FRM
certification). Candidates would
earn the FRM certification by paying a $175 fee and passing a GARP-sponsored
exam. The exam was offered in seven locations around the world, and
volunteers in the local chapters did much of the work. There were 130
candidates that first year, earning GARP $22,750. In subsequent years,
the registration fee grew, as did the number of candidates.
The FRM certification may have been GARP's first
significant money-maker, but there were others. GARP was soon running
lavish conferences in financial centers. They launched a glossy
magazine Risk Professional. They got into book publishing, asking
volunteers to write content. There were also plans for a multi-tiered
membership structure. Anyone who had entered contact details on the GARP website would still be a member,
but people who had passed the FRM exam would have a higher level of
membership, requiring annual membership dues.
By 2000, GARP was generating significant revenues, and
there remained little overhead or expenses other than those
associated with the money making ventures themselves. Except for programs run by volunteers at the local chapters, almost everything GARP
did seemed to be about making money.
At this point, Lore and Borodovsky filed paperwork to
shut down the non-profit GARP and replace it with a new for-profit
corporation with the same name. They had previously formed a
for-profit corporation called Management Risks Process to which they had
funneled GARP's conference business. Now they merged that firm with the
new for-profit GARP and, allegedly, pressed to be bought out—Borodovsky asking for $4.5 million; Lore wanting
All this happened out of public view, at the highest
levels of GARP. Nothing was announced on the website,
in Risk Professional magazine or in the monthly newsletter
e-mailed to members. The only external sign of change was the
disappearance of the phrase "not-for-profit" from a paragraph describing GARP
on the organization's website. Regional directors and other volunteers
continued to contribute their time, not realizing they were now working
for a profit-seeking corporation.
But too many people knew what was going on. Rumors
started to leak, and e-mails passed between concerned members. One
lengthy e-mail documenting GARP's money making activities and asked
where the money was going [read that e-mail].
When members of the media received copies, a
Over the next several months, Lore and Borodovsky
engaged in damage control, as a drip-drip-drip of revelations flowed
from trade magazines. GARP's recently-hired CEO resigned to be replaced
by the chief operating officer. Within six months, she too resigned. GARP's
advisory board headed for the doors, as did a procession of regional
In October 2001, it was announced that Lore and
Borodovsky would leave GARP and a "blue ribbon panel" would oversee the
organization's return to non-profit status. Little came of this, as
negotiations with Lore and Borodovsky dragged on. In January 2002, a
group of frustrated regional directors abandoned the negotiations and
launched a new non-profit called the
Professional Risk Managers' International Association (PRMIA)
as an alternative to GARP. The inaugural issue of their own newsletter
gave the risk management community a final insiders' glimpse of the
direction GARP was heading:
All of the founding Regional Directors of PRMIA are
former Regional Directors for GARP. You are probably aware of the many
months that we spent trying to recover the nonprofit status under which
GARP was founded and operated until late 2000. Our goal was always to
keep that association alive, but only if saving it meant no compromises
of our professional integrity. Many of us may still be on the GARP
mailing list. If so, you probably received an e-mail from GARP
announcing preliminary plans for a group of investors and others to take
financial and managerial control of GARP and related companies from
founders Marc Lore and Lev Borodovsky. We feel that it is important for
you to know that approximately two weeks ago, representatives of this
group approached the Regional Directors of PRMIA about their intent.
Since these plans included the continuation of a significant for-profit
element at GARP, our Regional Directors and Interim Board discussed and
very quickly rejected them as being inconsistent with the values that we
promoted as volunteers at GARP and in our volunteer efforts at PRMIA ...
Some people who abandoned GARP chose not to join PRMIA.
That organization adopted a disturbingly similar business model to that
of GARP, eventually offering its own Professional Risk Manager
certification (PRM certification),
courting sponsorships, running training programs and offering employment
GARP emerged from its negotiations with Lore and
Borodovsky. Their names were expunged from the website, as was any
mention of the scandal. The site is still up and running, drawing in
people who might be interested in becoming risk managers. It still
offers a free membership for those who provide their contact details.
Those who do are soon receiving offers for GARP's FRM
certification, conferences, training, downloads and more. As of 2007,
there were apparently 71,000 individuals receiving GARP's advertising—that
being the number of "members" GARP claimed on the website.
The GARP scandal unfolded in 2001-2002, just as the
world was struggling with the terrorist attacks of September 11, the
implosion of the stock market bubble, and corporate scandals, including
Enron and Worldcom. For risk
managers, it was an embarrassment. They were supposed to be experts at
rooting out fraud and abuse, yet they had volunteered their time and
spent money on GARP, oblivious to the lack of safeguards or controls.
Today, any comment that the risk management community should form a
non-profit to represent the profession's interests is likely to be met
with a derisive comment that "the last thing we need is another
The risk management profession is always looking for new
quantitative professionals. If you have good grades in a quantitative
undergraduate program and a confident interviewing style, you can land a
job. Employers train new hires in the finance and risk management skills
they need to know. That is how most professions work. Still, a few
individuals contemplating a career in risk management continue to be
diverted into the GARP certification, costing them money and postponing
their careers by as much as a year.