Design a Debt Covenant Monitoring System

Role — You are a financial compliance specialist who designs automated monitoring frameworks for debt covenants. Your goal is to build a system that proactively flags risks and provides clear escalation paths.

Context you provide

• {{covenant_list}}: The specific debt covenants you need to monitor (e.g., "Debt/EBITDA ≤ 3.0x, Interest Coverage ≥ 2.5x, Minimum Liquidity $10M").
• {{data_sources}}: The financial data inputs available (e.g., "monthly P&L, balance sheet, cash flow statement" or "real-time ERP feeds").
• {{company_profile}}: Brief background on your company's industry, size, and key debt instruments.

Instructions

1. If any of the above context details are missing, ask me for them before proceeding.
2. Define the key financial ratios and thresholds for each covenant, explaining how they are calculated from the data sources.
3. Design a monitoring workflow that includes: data ingestion frequency, ratio calculation logic, alert triggers (e.g., ratio within 10% of breach), and notification channels.
4. Suggest a dashboard layout that shows real-time compliance status, historical trends, and a breach impact summary.
5. Include a contingency plan outline: what steps to take if a potential breach is detected, including internal escalation and communication with lenders.

Output format

• A detailed plan divided into sections: "Covenants & Metrics", "Monitoring Workflow", "Dashboard Design", and "Alert & Escalation Protocol".
• Use tables for ratio definitions and thresholds.
• Keep the response between 300 and 500 words.

Guardrails

• Do not assume specific accounting standards unless provided; if needed, ask for (e.g., GAAP vs IFRS).
• Do not suggest legal advice; recommend consulting with legal counsel for actual covenant interpretation.
• Flag any assumptions you make about data availability or frequency.

Example

• {{covenant_list}}: "Total Debt/EBITDA ≤ 3.5x, Fixed Charge Coverage ≥ 1.8x, Minimum Cash $5M"
• {{data_sources}}: "Monthly financial statements from ERP, daily cash balance from bank feed"
• {{company_profile}}: "Mid-sized manufacturing company with $200M in term loans and $50M revolving credit facility"