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O brave new world?

Not for the first time, at News Corporation, has a global company suffered the slings and arrows of outraged criticism. Oil group BP was humbled last year for allowing oil to leak from one of its wells in the Gulf of Mexico, aided and abetted by third-party engineering contractors. Critics, led by US politicians, slammed its long-term safety record.

Not for the first time, at News Corporation, has a global company suffered the slings and arrows of outraged criticism.

Oil group BP was humbled last year for allowing oil to leak from one of its wells in the Gulf of Mexico, aided and abetted by third-party engineering contractors. Critics, led by US politicians, slammed its long-term safety record. Chief executive Tony Hayward walked the plank, and the company was forced to pay hefty compensation. To this day, court actions rumble on.

Western investment banks were brought low in 2008 by synthetic debt instruments whose value was supported by poor US house-owners servicing sub-prime mortgages. When house prices stagnated and house owners walked away from their obligations, the write offs undermined the banks, and triggered the collapse of Lehman Brothers.

In the case of News Corp, problems related to the failure of the News of the World to rein in access to information from the alleged hacking of mobile phones. When the hacking was directed against the rich and famous, the situation was (mainly) overlooked. When it affected the families of murder victims, that was a different story.

Running large organisations in times of stress has never been more challenging, as they fight for market share in a world where only the top performers can be expected to triumph.

The opportunities have multiplied. In a recent note, global equity manager Anthony Eaton of wealth adviser JM Finn & Co, argues we all need to get used to extraordinary growth in the demand for goods and raw materials.

Pointing to the surging value of art, wine, commodities, energy, luxury brands, prime residential property and so on, he said: “We in the west are constantly amazed at prices achieved because our reference points for prices at which supply and demand balance in a one billion population set simply don’t work in a globalised market six times the size.”

Sounds exciting? Not necessarily. The growth implies that the risks taken to satisfy it have become six times greater, given that the growth being achieved in emerging markets, while debt-laden developed economies struggle and the cost of raw materials for everyone goes up. The outlook is spotty. Top quality German exporters like BMW of Germany are booming while laggards like technology company Cisco are facing unprecedented competition from rivals, including some from Asia.

The breadth of the challenges being faced by chief executives face also means they are forced to rely on a range of junior executives computer networks and third party suppliers to keep everything ticking over. You couldn’t get further from traditional family business values if you try.

Surveillance is stretched. Wages are soaring as companies battle for access to talent. Finance from the banks is still being rationed, after the credit crisis. And journalists, bloggers and investors facing global competition of their own jump on failure.

In 2008-9, it was said that boards of directors at the banks never fully understood what their traders were getting up to. Instead, they spent their time plotting world domination and laying down challenging cash flow targets to boost profits and remuneration. BP also failed to keep an eye on safety standards, while chasing expansion opportunities.

For its part, News Corp senior management signally failed to keep an eye on what was going on at the News of the World.

Even though a large number of companies have responded successfully to the growing global challenge, to date, it is fair bet plenty more reputations will be put at risk in the months and years ahead.

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