The late Henry Kissinger was a distinguished advisor to seven Presidents, Secretary of State and a Nobel Peace Prize winner for his work opening China, achieving détente with Russia, and ending the Vietnam war. But his most enduring accomplishment. and least acknowledged, was in the role of Risk Manager. He established the American Petrodollar.
The American dollar was in trouble in 1974 because it was no longer convertible into gold. Dr. Kissinger had gained an understanding of the Saudis when he ended OPEC’s US oil embargo, and he was naturally adept at seeing opportunities others found hard to discern. So, in considering the risk of the dollar continuing to fall in value and taking the economic power of the US down with it, he and Treasury Secretary Bill Simon had a brainstorm. It was to agree to provide Saudi Arabia with the financial safety and military support they desperately needed. In return, the Saudis agreed to hold their reserve deposits in US Treasury bonds and require that OPEC oil sales worldwide be denominated in US dollars. The US dollar not only recovered, it took off and became the reserve currency of the world. And the return of petrodollars to the US financed the economic growth wave that America has been surfing for over fifty years. Thank you, Dr. Kissinger, in addition to being a great diplomat, you were an exceptional risk manager.
So, are you purchasing protection against risks, or are you also creating growth that causes risks to diminish or disappear? Do you combat price competition by cutting your prices, or are you becoming the market leader whose bids are chosen even though you charge a premium price because you are the safe choice? Are you preparing for the next economic downturn by planning ways to scale back, or are you working on your list of competitors to acquire at attractive prices? Look for those hard-to-discern upside opportunities as you work on mitigating the obvious downside risks. Someday, you may look back and see that your greatest achievements when you were leading your organization came in your role of Asset Risk Manager.
Ed Forsberg
Executive Strategist and CEO at Forsberg & Co.
