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The Benefits of Dual Risk Rating Deployed as a Turnkey Software Solution

With commercial loan quality under stress due to COVID-19-related pressures, many banks are discovering that the basic risk rating system they have employed for the last decade or more is not sufficient to rate, manage, and report on loans in the current environment. A more robust risk rating system – one that separates the borrower risk from the loss given default risk and increases granularity among the pass grades – can provide banks more targeted and refined insights into which borrowers need help. Unfortunately, banks often lack the resources or expertise to upgrade their risk ratings approach.

If this situation sounds familiar, your bank may want to consider turnkey dual risk rating software as a high-impact, low-expense solution. Read on to explore the benefits of this approach and learn about how it works.

Dual Risk Rating Solution Deployment Options & Benefits

Cost is one of the major barriers to making the shift to dual risk rating. Packaged neatly as a ready-to-use software solution, dual risk rating immediately becomes easier and less costly to implement from a time and money perspective.

When it comes to commercial credit, not every bank has complete technology capabilities. Depending on your bank’s situation, you have two deployment options to consider:

  1. Standalone web-based solution with a dedicated user interface (UI) for data entry, risk ratings, and client/portfolio management
  2. Tightly integrated with an existing loan origination system (LOS) or other loan management technology ecosystem to enable a seamless user experience

The first option is likely best for smaller banks with a more limited loan management technology stack. In this scenario, the dual risk rating solution acts as the central point for data entry and management, as well as reporting and analytics at the client and portfolio level. Basically, it is a one-stop shop for all things risk rating-related without the hassle of software licenses or servers.

The second option is likely best for mid- to large-sized banks who utilize a robust LOS like nCino or Wolters Kluwer (among many others) with open API endpoints to connect to other technologies, such as the dual risk rating solution. See the next section for more information on how this works.

How Integration Works: An Example

The above diagram illustrates how a LOS can seamlessly integrate with a dual risk rating solution. This integration enables credit analysts to spread financials, risk rate the credit, and continue with the loan origination process without ever leaving the platform they are working in. Since there is no need for duplicate data entry, this results in improved data quality and management for the bank.

Playing the Long Game: Loan Quality Reporting & Analytics

Even in “normal” times, industry trends and borrower situations can change rapidly. As such, portfolio reporting and analytics are critical components of a dual risk rating software solution that simply are not available through less sophisticated, often Excel-based risk rating systems.

Here are some things you can do from a reporting and analytics perspective with a dual risk rating solution:

  • Report on portfolio concentration and migration over time
  • Segment your portfolio to analyze trends by industry, company size, etc.
  • Analyze a client’s risk rating versus loan performance over time
  • Benchmark new risk ratings against existing or peer bank borrowers based on client similarity

How to Get Started with Dual Risk Rating

We understand the challenges facing our member banks who seek to improve risk rating. That’s why we worked closely with member banks and ACTICO, a leading platform technology provider, to develop RMA Dual Risk Rating, an enterprise-grade software solution that makes it easier than ever to upgrade your bank’s risk rating system. As described above, RMA Dual Risk Rating can be deployed either as standalone web-based solution or integrated seamlessly with your existing LOS.  

To learn more about RMA Dual Risk Rating, visit our website or email today.


Steven is the Director of Business Solutions at RMA, responsible for all five of its core products. He is a 25+ year veteran of the banking industry with proven expertise in successfully developing and implementing bank technology. Most recently, Steven was VP at Sageworks, helping financial institutions modernize lending. Steven holds an MBA from Stanford University.