Damage to brand or reputation was rated the number risk facing the sports, recreation and entertainment (SRE) industry in Aon’s latest Global Risk Management Survey.
This was closely followed by business interruption, cyber-attacks, data breaches, increasing competition and vendor management or third-party risks ranked in the top five risks.
The sports and entertainment industry – which includes media, events and recreational activities – showed a markedly different ordering of its top risks from the 16 other industries polled in the survey, however, this is not surprising given that the industry is heavily reliant on aspects of image and brand reputation.
According to Aon’s Global Risk Management Survey, the sports and entertainment sector relies on emotional purchases and is competing for discretionary spending, thereby making it heavily driven by image and consumer confidence. This makes reputation and brand management particularly important – but also more difficult to manage.
According to Philip Cronje, business unit manager of Aon South Africa’s sports, recreation and entertainment division, successfully navigating this terrain requires an acute focus on reputation and brand management.
“The ability of companies to communicate effectively and respond swiftly becomes pivotal in this highly volatile, fast-paced environment,” he says.
“A single disruptive event possesses the potential to swiftly erode a business’s reputation, underscoring the imperative for organisations to proactively minimise damage to their brand and reputation, even when confronted with events beyond their immediate control.”
Top 10 risks ranked by the SRE industry
- Damage to brand or reputation
- Business interruption
- Cyber attack or data breach
- Increasing competition
- Vendor management or third-party risk
- Third-party liability (e.g., E&O)
- Economic slowdown or slow recovery
- Rapidly changing market trends
- Failure to innovate or meet customer needs
- Pandemic risk or health crises
“An increasing number of external factors are forcing sports and entertainment organisations to focus on damage to brand and reputation risk ranging from the omnipresence of social media through to regulatory exposure from both a local and global perspective” Cronje explains.
“This shifting landscape includes constantly changing consumer preferences regarding transparency and ethical behaviour, all of which contribute to a framework of inter-connected risks.”
Factors influencing damage to brand or reputation:
- Amplification and interconnectivity of social media: Social media allows information to spread rapidly. Any negative event or controversy travels within seconds, making it challenging to control the narrative and manage the brand’s reputation. A delay in response can lead to speculation and misinformation.
- Market exposure across a regulatory landscape: Different regions have diverse regulatory landscapes, cultural norms and stakeholder expectations, which is why organisations must navigate and adhere to these diverse standards, where any misstep can lead to reputational damage.
- Demand for transparency: Modern consumers are increasingly demanding transparency and ethical behaviour from organisations. In its absence, organisations stand the risk of losing the trust of their consumers, which is crucial for brand integrity.
- Data privacy: In an era where data privacy is a paramount concern, organisations must safeguard customer information to avoid reputational damage and legal repercussions.
“Many events that affect brand and reputation can be completely out of an organisation’s control. This is where decisive decision-making based on data and rapid response communication models are critical to protecting shareholder value and minimising commercial impact,” says Cronje.
Future risks
Cyber-attack or data breach is predicted to become more pressing, moving up two places to be ranked as the number one future risk by sports and entertainment respondents, in line with many other surveyed industries.
As the sports and entertainment industry becomes more dependent on technology and technological innovation, the threat that cyber-attacks or compromised data can pose for organisations grows ever greater.
Not only can cyber-attacks shut down key operations such as online sales and ticket processing, but they could also expose sensitive information that may put a business, sponsors and customers at risk.
Mitigating the risk
Financial and operational discipline will be vital to addressing the top risks for the sports and entertainment industry.
First, periodic reviews and updates of all IP and associated risks and opportunities can help decision-makers identify and quantify them on the balance sheet.
“It will be pertinent for organisations in this space to align the risk function with IT and legal so the three functions can collaborate and communicate openly and continuously from an operational point of view,” Cronje says.
“Regular tabletop exercises can help keep the organisation ready to respond to unexpected or adverse events. Live events can benefit from similar preparation. Threat assessments, drills, rehearsing responses and undercover assessments are key to refining the process and coordinating staff, third-party contractors, law enforcement and customers,” he adds.
Event organisers and investors should engage in open discussions with a specialised risk adviser in sports, recreation, and events, who will be able to thoroughly assess the unique aspects of their business, including its exposure to potential brand and reputational damage coupled with effective mitigation strategies.
Properly tailored insurance and robust risk management and business continuity plans enhance preparedness, ensuring the longevity of the sports and entertainment industry, and empowering organisers to make informed decisions for both risk mitigation and recovery from unforeseen events.
