Has All That Risk Caught Up With BP?

Posted: June 7, 2010 in On Target
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BP’s woes in the Deepwater Horizon disaster in the Gulf of Mexico are consistent with its longstanding culture of risky behaviour and gambling. BP has had many costly accidents and incidents, with major losses in both money and lives. This is nothing new for BP. The company started in the early 20th century as the Anglo-Persian Oil Company, to exploit Iran’s oil resources. It has historically operated in the most dangerous and risky areas of the globe. After the fall of communism, BP invested heavily in Russia and has had numerous disputes with Russian partners and the Russian government. This shows just how persistent a corporate culture can be. BP’s strategy is to be at the forefront of the riskiest exploration and production plays in the world, presumably in order to access the biggest rewards.

Well, you can’t make high-stakes gambles consistently and not lose a few along the way. That is why BP has been dogged by controversy over the years, most recently with the Gulf of Mexico crisis. Most global companies with this much at stake are much more risk averse. They ensure that risky undertakings and outright gambles are only a small part of the business, or can at least be sequestered from their other operations and results. However, BP’s high-stakes culture means it has one of the highest corporate risk appetites in the world, and certainly in the already risky oil business. The rewards can be great, but eventually the cowboy mentality and cultural machismo of riskiness can catch up to you. I for one see major risks in the immediate future for BP, and ultimately when the full consequences of this disaster play out.

© 2010 Richard Martin

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