Guest post by Matthew Ashworth, cofounder and managing director of Hyperion Risk Management
For most banks, the spotlight in credit risk management falls on origination and underwriting. Getting the decision right at the beginning is crucial, but regulators and credit officers know the real work doesn’t stop there. Once a loan is on the books, the obligation to monitor its health, the performance of the financial institution’s broader loan portfolio, and the quality of the organization’s risk management practices becomes just as important.
From my time as both a commercial banker and a bank examiner, I’ve seen firsthand how easy it is for financial institutions to “book it and forget it” when it comes to their loans. But regulators expect more. In fact, there are three critical layers of review that every credit function must address:
- Individual credit monitoring: Banks must make sure each borrower’s ongoing financial health, repayment sources, and industry position remain consistent with the original underwrite. When there are changes, the bank must demonstrate understanding of how that changes the risk.
- Portfolio-level reviews: Organizations must evaluate loan portfolios and loan concentrations, running periodic stress tests on segments such as hotels, healthcare, or logistics providers. In the course of this process, they also need to ask tough questions about how the portfolio would hold up under shifting economic conditions.
- Independent credit reviews: Whether performed internally or outsourced, organizations need to provide a double-check that the first and second lines of defense are effectively managing credit risk.
Industry Intelligence is a necessity for credit teams
Traditionally, Industry Intelligence tools, such as Vertical IQ, have been used by lenders to demonstrate expertise in front of clients and to document their understanding of borrower risks during origination. When I was a commercial banker, I used Vertical IQ daily to get up to speed prior to any client conversation.
But in today’s uncertain lending environment, Vertical IQ’s Industry Intelligence has a much broader role to play, particularly for credit officers responsible for ongoing loan review and portfolio monitoring.
Save time while maintaining confidence in reviews
One of the most immediate benefits Vertical IQ brings to credit teams is the ability to conduct faster, fact-based reviews. Credit officers no longer need to cobble together information from disparate sources such as trade associations, regulatory reports, or outdated industry articles.
With Industry Intelligence from Vertical IQ, they have a single, reliable resource for industry trends, forward-looking forecasts, and risk factors. This centralization not only saves valuable time but also reduces the likelihood of blind spots that can create unpleasant surprises when portfolio performance comes under stress.
Stronger stress testing
Industry Intelligence also enhances the quality of portfolio stress testing. Consider a bank with a significant concentration in hotels or medical practices. With Vertical IQ’s Industry Profiles and forecasts at their fingertips, credit officers can layer specific data into “what if” scenarios. They can examine how downturns in occupancy rates or shifts in healthcare demand might ripple through their loan books.
This data-driven approach enables institutions to document their preparedness. But just as important, it allows them to demonstrate to regulators and other stakeholders that they are proactively managing risks tied to industry concentrations.
Better communication with the board of directors
Using Vertical IQ also strengthens communication between credit leaders and their boards. If you’re a chief credit officer and you need to justify existing concentration levels or recommend changes to policy limits, presenting objective, timely Industry Intelligence is far more compelling than relying on experience alone.
Consider too that boards and regulators alike value decisions supported by data. Being able to show measurable industry insights builds your credibility and boosts confidence in your institution’s risk management practices.
Making the CECL connection
With my bank examiner background, I’d be remiss if I didn’t connect the dots between Industry Intelligence and current expected credit losses (CECL).
CECL is often thought of as a chief financial officer’s (CFO’s) domain. Indeed, it intersects with the credit function in important ways. Under CECL, banks must estimate lifetime expected losses at origination, informed by:
- Historical loss data
- Economic forecasts
- Qualitative factors (aka “Q-factors”)
And it’s here that I believe Vertical IQ’s content provides real value for financial institutions.
Many banks rely on national data from firms, which can feel disconnected from regional and industry-specific realities in certain cases. Vertical IQ’s localized and sector-driven insights can help refine forecasts and justify Q-factor adjustments, particularly in portfolios with high industry concentrations.
For example, consider a financial institution that is heavily exposed to childcare centers or third-party logistics providers. Credit team leaders can use Vertical IQ to demonstrate a deep understanding of those industries, bolstering both CECL calculations and regulatory confidence in the bank’s methodology and underlying assumptions.
Raising credit quality while lowering risk
For financial institutions’ chief credit officers, the mandate is clear: Maintain credit quality, manage risk, and prepare the bank to withstand scrutiny from both regulators and the board. By integrating Industry Intelligence from Vertical IQ into the loan review and monitoring process, credit officers can:
- Improve efficiency by reducing the time spent gathering and validating industry data.
- Minimize uncertainty while enhancing the rigor of portfolio monitoring and stress testing.
- Support defensible CECL methodologies, particularly around Q-factors.
- Deliver stronger, more data-driven, fact-based reporting to boards, regulators, and other stakeholders.
In short, Industry Intelligence isn’t just a sales tool. Used strategically, it’s a powerful lever for improving credit quality and oversight across the lifecycle of a loan.
Matt Ashworth (right), cofounder and managing director of Hyperion Risk Management, is a former commercial banker and bank examiner at the Office of the Comptroller of the Currency (OCC) with over 25 years of experience in commercial banking and credit risk management. He earned a finance degree from the University of Georgia and is a graduate of the Pacific Coast Banking School at the University of Washington.
Hyperion Risk Management is an independent regulatory advisory firm that partners with companies of all sizes and complexity in the financial services industry. Their services include regulatory remediation, strategic collaboration, independent credit review, risk management system development, and more.
Main image: Pexels, Jakub Zerdzicki; headshot image: Matthew Ashworth