Financial Risk Management: The Sports Industry
Financial risk management is the process of reducing a firm's exposure to various risks. According to Emery (2011), it is a process that enables organizations to reduce failures and increase their profitability by carefully evaluating the risks they are exposed to and developing strategies to manage them. The sports industry can learn a lot from the business industry in regard to risk management as it is often prone to issues such as corruption and drug abuse, which it is often insufficiently prepared/equipped to deal with. The office of Sport and Recreation Tasmania (as cited in Emery, 2011) claims that today, risk management is a central part of sports organizations' strategies because it enables management result to balanced and responsible decision making. This text examines risks sports businesses are exposed to, how financial risk management can be applied, and the strategies that should be applied to protect business finances.
Risks faced by sports businesses
Finance risks
Most major leagues operate under the constant threat of financial instability. Bankruptcies distort products and interfere with the financial capability of an entire league. The American National Football League (NFL), for instance, is known to be the most successful league globally but it constantly struggles to secure its financial stability (Troelsen and Kuperman, 2006). It uses salary caps and equal revenue distribution tactics to increase cost savings and reduce loss control.
Reputational risks
News of corruption, age cheating, identity theft and doping are becoming quite popular in the sports industry. These charges are bad for the image of any sports business and league, since they damage...
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