Streamline Operations. Operationalize Growth.

We at Catalyze Labs have spent years working with banks and financial services firms to uncover hidden operational costs and convert them into growth-engines. Today we’re excited to introduce our next step: CovenantFlow, an AI-native, workflow-centric platform designed to transform the often-overlooked world of covenant compliance and portfolio monitoring into a strategic asset.

The Hidden Cost of Covenants

For many commercial banks, covenant management is treated like a necessary evil — an after-thought, a cost centre, a spreadsheet-marathon. But the numbers tell a different story.

• A recent article from our own insights noted that relationship managers and credit-ops teams can spend 30-40% of their time chasing borrower financials, keying data into spreadsheets, and manually testing covenant thresholds. (Catalyze Labs) 

• A 2023 study by Hui L. James found that covenant violations are significantly associated with lower operational efficiency — firms violating covenants invest less in capital and labour and operate less efficiently. 

• Across banking operations, productivity has stagnated: according to McKinsey & Company, U.S. banks have experienced declining productivity (-0.3% annually since 2010) while costs continue to rise. (The Financial Brand)

• According to KPMG research, 66% of banks set cost-savings targets of >10% of the cost base over the next 3 years; 59% identified digitization as the most important lever. 

  
  

What’s clear: covenant monitoring is not just compliance. It’s a key operational workflow — one that if optimized, can reduce cost, reduce risk, and free up time for true relationship management and growth.

Why CovenantFlow?

1. From manual to continuous, real-time

Traditional covenant tracking often means quarterly reviews, spreadsheets, ticklers and calendar reminders. With CovenantFlow we embed automation, alerts, dashboards and a continuous monitoring mindset — meaning issues are flagged early, not after the fact.

2. Institutionalize covenant-workflow as a strategic function

Borrowers and lenders alike are expecting more transparency, more agility, and more partnership. CovenantFlow shifts the narrative: rather than “we’re calling because there’s a breach”, the conversation becomes “we’re tracking this together, here’s what the data says”. This builds trust and opens the door to higher-value advisory conversations.

3. Lower cost, reduce risk, scale capacity

By automating data intake, trending covenant-metrics, exception-escalation, and audit-ready reporting, banks can reduce the time and effort spent on compliance. That means credit-ops teams can manage more volume, or redeploy time into origination and value-add tasks — boosting portfolio capacity without proportional cost increases.

4. Build your future-proof operating model

As banks simplify their tech stacks and push for agility, platforms like CovenantFlow become key anchors. By bringing covenant management into an AI-native, workflow-driven architecture you’re not just solving for today’s challenge — you’re future-proofing your portfolio infrastructure. (See McKinsey: “simplification at scale”) 

How It Works: The Core Flow

1. Ingest borrower financials, collateral reports, covenants and thresholds (automated where possible).

2. Map each covenant (affirmative, negative, financial) into the workflow engine with triggers, escalations, and alerts.

3. Monitor in real time – dashboards show borrower behavior vs thresholds, red-flags, and trends.

4. Alert & Engage – when anomalies or breaches appear, workflows route to the right authority, borrowers are notified, remediation begins.

5. Report & Improve – analytics show portfolio-wide covenant health, bottlenecks in process, capacity metrics, and risk early-warning insights.

The Business Case – Metrics to Watch

When banks deploy solutions like CovenantFlow, there are several measurable outcomes:

• Reduced manual effort: fewer hours per loan/tranche spent on monitoring, document gathering and spreadsheet work. (Sources note heavy manual burden) 

• Faster detection of issues: earlier warning of breaches or covenant slipping means more options for workout or remediation, which translates into fewer defaults or losses.

• Lower unit cost of originations and servicing: with McKinsey showing mortgage origination costs rising from ~$5,100 in 2012 to ~$11,600 in 2023, the pressure to reduce servicing costs across portfolios is real. 

• Capacity uplift: when teams spend less time on manual compliance monitoring, they have more bandwidth for growth activities — origination, borrower engagement, strategic advisory.

• Stronger risk controls: as the study by James shows, covenant violations correlate with lower operational efficiency, meaning stronger covenant workflows support stronger operations. 

Catalyze Labs’ Approach

At Catalyze Labs, we emphasize a blended framework — design thinking, agile methodology, and first-principles thinking. We apply that to CovenantFlow:

• Design thinking: mapping the current covenant workflow, identifying pain-points (data gathering, manual inputs, lack of alerts, borrower friction) and redesigning for user-centric flows (for both lenders & borrowers).

• Agile methodology: iterative deployments, early prototypes, user-feedback loops, rapid refinements — so you get value quickly, and evolve the solution with your team, not after a long-drag.

• First-principles thinking: rather than bolting automation on legacy spreadsheets, we ask: what is the ideal covenant-monitoring workflow? What are the assets (data, documents, alerts, relationships) and how should they interconnect for zero-friction operation?

What’s Next?

If you’re a relationship manager, credit-ops lead, portfolio-risk executive or COO at a commercial bank, consider these questions:

• How much of your team’s time is engaged in manual covenant-monitoring tasks?

• What is your average time-to-detection of a covenant breach (or covenant-slip)?

• How many covenant breaches go undetected for weeks or months (and what is the cost of that delay)?

• Could you reallocate 30-40% of that manual effort into growth activities if you had a streamlined monitoring workflow?

• What would your portfolio capacity look like if you reduced servicing cost per loan/tranche by, say, 20-30%?

CovenantFlow is our answer to those questions. Reach out to us at Catalyze Labs to explore how we can help your bank operationalize growth through better covenant management.

Final Thought

In today’s banking landscape, where cost pressures, regulatory burdens, client expectations and margin compression all collide, it’s no longer enough to treat covenant compliance as a tedious checkbox. It must become a strategic workflow — one that supports growth, risk-management and client-partnership.

With CovenantFlow, Catalyze Labs is helping banks convert covenant management from back-office burden to front-office opportunity.

Let’s streamline operations. Let’s operationalize growth.