Written by David Nicholson, founder and president of Credit Training, Inc.

Successful commercial bankers protect their bank’s assets while driving business growth. To accomplish this difficult task, they must easily identify and manage credit risks. However, finding great tools to assist in this process has been very difficult…until now!

Great output and easy to use

It seems we live in a world of what I call “hyper-analysis” — taking something that on the surface requires mostly good judgment and experience, and then over-complicating it. The goal is too often to answer: How can I out-analyze the other person? But instead, what if we could take a process that is complicated, like understanding the risks inherent to lending to an industry, and simplify it?

Great decisions are made by taking something that is complicated and simplifying it to its primary moving parts. When a banker can do that, he or she offers a more clear understanding and a more fluid and productive conversation. Vertical IQ has simplified the process of analyzing industry risks for the commercial banking world. It is long overdue.

I was excited when asked to create this proprietary industry risk rating tool for Vertical IQ because this project provides financial analysts, portfolio managers, commercial lenders, and credit officers the much needed tools to assist in the decision-making process as to what risks to look out for in the full range of industries.

Having been in the commercial lending world for 22 years, I know what this type of tool would have done for me as I prepared for a prospect call, as I prepared for a committee meeting to discuss a new opportunity, and when I was a credit analyst trying to wrap my arms around a new industry and sound like an expert. If only I could have had Vertical IQ right beside me all the time, like a “partner.”

Throughout my years in commercial banking, I had to sift through internet-based information for privately held companies that might provide me with a basic understanding of industry-specific risks. Oftentimes I did this work just before the prospect call. But this was a very challenging way to sound like an expert because the information was rarely financial insight and often missed the mark. Yet, commercial bankers are supposed to sound like experts in all industries.

What’s the solution?

Vertical IQ has provided an outstanding Industry Intelligence solution for many years. CEO and co-founder, Bobby Martin, asked me to use my years of experience to put together a new Risk Rating Tool using an advanced algorithm I designed to calculate industry risk ratings, driven from what I call “sub-category” ratings such as business exit rates, sensitivity to cyclical changes, barriers to entry, external risk assessment, industry outlook, and financial summary.

Sub-category ratings easily identify the risks. For example, an industry may have a positive outlook, but it may also be very cyclical. These two sub-categories would negate each other in an overall industry risk rating. However, it is critical for the bank credit underwriter to identify and understand these sub-ratings and mitigate the weaknesses with strengths.

Delivered through artificial intelligence

This system uses a form of artificial intelligence-style code to think like a credit-trained, 22-year commercial banker. For the analyst, lender, or credit officer, it is easy to use and points the user to the risks to watch out for while helping in the loan decision-making process. Speaking from experience, this tool would have provided me with better loan decision capabilities, better time management, and I would have won more deals.

To learn more about Vertical IQ’s new proprietary Industry Risk Ratings, please visit our press release, Vertical IQ Launches Credit Underwriting Solution, Plus New Industry Brief.  

David Nicholson - Head Shot

About David Nicholson

David is a 22-year career commercial banker, specializing in C&I lending in the New England market.  Just over five years ago, Mr. Nicholson founded Credit Training, Inc., which is a formal commercial credit training company.  Credit Training, Inc., provides a three-month formal credit training program to 14 banks from Massachusetts to Georgia. It is a live, fully interactive, internet-based program, which includes multiple two-hour classes a week.