What risks do online casinos face and how do they manage them?

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Risk management is counterintuitive — planning for something you hope won’t happen. But it’s a necessity for every business, online casinos, and sportsbooks included. What risks do online casinos and sportsbooks face, and how can they manage them? Ayvar Gabidullin, Business Development Manager at Slotegrator, shares some key recommendations.

There are three main types of risks that online casinos face:

Operational

Operational risks are the most preventable. These are the risks of having hiccoughs in your daily business processes, so the better run your business is, the lower your levels of risk are.

Some examples include technical issues like software glitches, loading errors during gameplay, and dropped connections during deposits or withdrawals. A dropped session mid-spin will frustrate both the player and the support team that the player contacts and a technical error that allows six or seven players to hit a massive jackpot in a timeframe when only one should have been awarded will cause a massive financial headache.

Managing operational risks: operational risks are dealt with by optimizing processes, establishing clear responsibilities, and providing ongoing training and monitoring.

Strategic

Making decisions about the future of the business inevitably incurs some strategic risk.

Strategic risks arise when forming new partnerships, developing and releasing new products, investing in other companies, and expanding into new markets.

For example, entering an emerging market with the expectation that it will grow fast enough to recoup expansion costs within a year is a strategic risk; if the market fails to grow at the expected rate, there could be serious financial repercussions. Taking on debt in order to expand your operation is risky; if things don’t go according to plan, you might struggle to meet your obligations if the expected returns fail to materialize.

Entering into a new partnership is also a risk; if the partnership doesn’t work out, it might cost you other opportunities. There’s also the decision to acquire a license or not (Slotegrator definitely recommends that you do).

Managing strategic risks: companies handle strategic risks by accepting a certain level of risk and creating contingency plans in case those events come to pass.

External

External risks are not only beyond our control; they're often beyond our ability to predict.

In iGaming, external risks are often linked to authorities’ changing perspectives on the industry. Regulations can change seemingly overnight if public opinion swings one way or another. Also, when governments find themselves in need of extra cash, online gambling is often among their first targets for a tax hike. Of course, there are also high-impact events that can’t be predicted or prepared for at all, like the COVID pandemic.

Managing external risks: to mitigate the effects of external risks, one step you can take is to tend to your company’s financial health and maintain enough liquidity that you can be flexible in the face of unforeseen circumstances.

There is a new analytical article on Slotegrator Academy about three kinds of risk in online casinos with common examples and recommendations for managing.