These days, many are interested in starting a gaming operation. When seeing the success of so many companies in the field, some entrepreneurs think that managing a betting site is synonymous with easy profit.
But not quite.
Risk management is a primary activity for sports betting operations. She is largely responsible for making betting sites viable and profitable business models.
Betting sites are used to customizing the variety of leagues, events and types of bets they offer to their audience. But ensuring the sustainability of a gaming operation involves much more than that.
Risk management helps keep companies safe and profitable. The activity must be carried out with the greatest possible discretion, as it is essential for the long-term success of a betting company.
We can say that risk management in a gaming operation involves two main areas.
1. Loss limits
There are different approaches to risk management in sports betting, each with its own characteristics. One of the main ones is the establishment of so-called loss limits.
With the use of this tool, certain betting options can be blocked when a predefined loss limit is reached.
If the lock is triggered, when enough bets are placed on the opposite odds to compensate for the potential loss on the former, the locked options will be made available again.
The loss limit allows companies to minimize their risk and at the same time achieve more sales. Let's see an example:
Let's think about a football match between Brazil and Argentina, where bettors on a Brazilian website place a lot of bets on their National Team (odds “1” from the “1X2” market).
As a result, the market became unbalanced, which means that the loss limit for odd “1” was reached.
When this happens, odds “1” will automatically become unavailable for betting. However, bets can still be accepted for options "X" and "2".
At that moment, the bookmaker can, for example, increase the odds of the Argentine team in order to balance the portfolio. Or, you can wait until enough bets are placed on the “X” and “2” market.
If several bets have been placed on odds “X” and “2”, the market evens out and odds “1” can be made available again.
With this strategy, the defined risk margin will never be exceeded. At the same time, it is possible to bet on the markets for as long as possible. Therefore, the house risk is minimized, while the turnover can be higher.
One of the biggest challenges in implementing risk management strategies is the fact that they need to be individual to each company and target market. According to our example, the scenario is one in Brazil and the other in Argentina, for the same event.
This is because the conditions and structure requirements of different markets and groups of bettors vary significantly.
Another very important point is that the risk management strategy must also be aligned with corporate objectives.
This means adopting approaches that prioritize the long-term viability of the entire system, including other areas of the organization. For example, marketing strategies can be coordinated with the risk management team to align short-term objectives with long-term strategic goals.
That is, certain markets and sports may be more publicized at certain times, with the aim of balancing the bets, helping to keep the house risk within a positive pattern.
2. KYC - “Know Your Customer”
To protect your company against fraud, errors or excessive distribution of profits, it is necessary to implement KYC processes. This service involves constant monitoring of the identity of customers, as well as the games and bets placed by them.
This function can be outsourced, which makes the process more specialized, also reducing the betting company's costs.
It is important to know that a large part of risk management measures can be automated. Some systems allow certain customers, such as exceptionally knowledgeable players, who have an unfair advantage over the house position or unwanted bets, to be prevented in order to preserve the profitability of the business.
These automated solutions have the ability to detect, monitor and manage potential malicious behavior or out-of-balance events that could pose a financial threat to operations.
Hierarchical loss limits for markets, leagues, events, and players can be triggered preemptively. This approach allows risk managers to identify and anticipate threats such as unwanted financial risks.
Finally: for the sustainable growth of a betting company, efficient and professional risk management is paramount. It ensures the long-term security and profitability of the company. Did you like the topic? Then, we can talk more about it.
Source: Exclusive GMB
