Bankers awaken every day to find themselves mired in the ongoing “Groundhog Day” scenario of continued margin pressure and uncertainty regarding the future of interest rates. A well-informed ALCO focused on making decisions with the right information, however, has far better odds of balancing current earnings needs with the challenges of preparing for the next change in the rate cycle. Making decisions and executing effective strategies start with gaining a clear understanding of the true risk profile of the balance sheet. This requires accurate data and, most critically, supportable assumptions that reflect real-life experiences of your institution. It also requires challenging the “plausible” with an understanding of the downside risks of the potential unexpected, while embracing the roll of stress testing as a quality assurance component of the risk management process. Then and only then is your ALCO truly prepared to assess the risk/return tradeoffs of strategic actions aimed at managing risk and optimizing earnings over time, through a wide spectrum of rate environments, and in a manner consistent with the philosophy defined by your board of directors. The process that ties it all together is at the very core of every high-performing ALCO.