It’s a Game of Risks

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It’s a Game of Risks
Top risks facing Canadian gaming organizations


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The gaming industry's ability to attract dollars and generate profit is attractive to corporate investors and governments alike. However, as competition grows and public and regulator attention increases, the ability to manage a more complex risk environment becomes critical. While most organizations have risk management processes in place, not all are developing the proactive risk management approach needed to remain an industry frontrunner. TOP RISKS FACING THE CANADIAN GAMING INDUSTRY Today’s risk landscape includes both emerging new risks and evolving old ones. They include:

Reputation. Gaming, in Canada, is “conducted and managed” by provincial governments which are highly sensitive to public pressure. As such, gaming organizations are reluctant to attract undue public scrutiny. The best way to avoid unwanted attention is to focus on doing things the right way, being transparent, and ensuring your reputation remains untarnished.

Social responsibility. There are unavoidable perceptions around the industry, such as the addictive implications of gambling and increased crime; both of which are a common media focus. Government organizations that conduct and manage gaming should have appropriate gaming programs in place to help patrons gamble responsibly.

Regulatory/compliance. These types of risks are numerous and increasing and include scrutiny from FINTRAC (The Financial Transactions and Reports Analysis Centre of Canada), as well as a range of provincial regulations. Failure to comply can incur costly penalties and potentially lead to an operations shutdown. Organizations should implement an appropriate controls framework and effective reporting standards to ensure timely and thorough compliance.

Further global recession. People whose disposable entertainment income is shrinking will be more particular about where they spend it. Accordingly, organizations must ensure gaming remains an attractive entertainment option. Potential strategies include more creative marketing; gaming innovations; customer retention initiatives; and better leveraging of media and online technologies.

Digital customer attrition. As customers move to digital gaming formats, traditional gaming venues and facilities may experience reductions in both profits and auxiliary revenues, such as food and beverage and accommodations. Mitigating measures include improving or changing marketing strategies and diversifying your income stream by entering the online space.

Cyber-risk and privacy. The more the industry expands to online games and systems, the more difficult it is to protect yourself. Hackers—whether engaging in theft, politics, cyber-terror, or “fun”-- are making it harder to ensure the safety of your digital information. Assess your vulnerability to unauthorized access, viruses, data loss, or theft, and quickly address any gaps. Remain vigilant as cyber- threats evolve by the minute.

Online expansion. Internet gaming is growing rapidly and can be a strong business driver, but expanding operations to include an online platform also exposes you to a new competitive environment. The challenges to succeeding in the crowded online market are significant, and organizations need a comprehensive strategy to do it successfully—preferably before making the move.

Fraud, theft, and betting scams. This remains an inherently high risk globally, but in well-regulated jurisdictions like Canadian provinces, this risk is somewhat lessened, making residual risk lower. Nonetheless, it’s imperative that organizations have up-to-date anti-fraud strategies, policies, and controls in place on top of a range of practical processes to detect and deter theft.

The risks facing this industry are too prevalent and evolving too rapidly to leave stopping them to chance. This means setting the right 'tone at the top', getting the board involved, developing risk teams, and ensuring everyone involved understands the organization’s risk appetite. To be successful, gaming organizations have to maintain a strong reputation, and remain socially responsible, compliant, and secure.

Lesley Luk (lluk@kpmg.ca) is a Senior Manager in KPMG’s audit practice and Angela Mitchell (angelamitchell@kpmg.ca) is a KPMG Partner in Risk Consulting.

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