This approach can not continue in any industry, and certainly not in gaming, particularly when passport restrictions on potential customers abroad and a high Canadian dollar relative to the greenback stand to soften revenue per square foot. This situation is made worse as recovery in the U.S. remains slow and recreational travel to Canada crawls along a similar course.

In addition, Canadian gaming organizations need to balance social responsibility and profitability, while simultaneously driving performance. To achieve these goals, gaming organizations should adopt new approaches in their planning processes.  At a KPMG Planning and Budgeting Share Forum in 2009, companies identified the following emerging leading practices:  

Scenario planning: A focus on the range of alternative situations versus being precise with just one is critical.

Dynamic tools: Many models used today are based on historical trends but standard models based on averages over time cannot capture rare events well, if they can at all. Current economic conditions should make these shortcomings evident and underscore the need for dynamic thinking and flexibility in the tools used.

Broader use of data input: Models in use today need more data to get a better perspective in sectors and segments where companies have little or no prior experience.

Increased reliance on stakeholders:  Those working with and building forecasting models must determine how much real-time data they need and are getting from stakeholders, the nature of that information and its sources.

Reliable forecasting enables organizations to sense and respond to business conditions and make appropriate changes in real time. Top executives recognize that without reliable forecasting at the heart of their performance management process, management information will be mired in detail about the past and they are likely to miss key opportunities and inadvertently overlook risks.

While each of these leading practices is important in land-based gaming, they become even more critical for the rapid-paced and faster-evolving online gaming sector.

Online gaming

Already a $1 billion a year segment across Canada, online gaming is poised to grow, led by provinces like  British Columbia which has made the move to offer casino games such as blackjack, poker, and roulette online. Other provinces exploring whether they should follow British Columbia's move are undecided for now but the prevailing belief is that Quebec and the Atlantic provinces are ready to give it a green light with Ontario to follow, especially after Quebec operators received provincial cabinet approval earlier this year.

If governments and agencies alike in Canada choose to offer online gaming, they will have to deeply scrutinize what they intend to achieve before they attempt to turn their plans into a success. The list of potential pitfalls is a long one that ranges from domestic and foreign competition to legal and social responsibility to technical implementation — factors detailed in KPMG’s Online Gaming: A Gamble or a Sure Bet, issued earlier this year.

Robust checks and balances such as anti-fraud, responsible gaming and child protection measures are all necessary to help ensure success and prevent negative financial and social impact on operators and the broader community. A revised approach to planning will enable this to occur reliably.

To make it through these turbulent and changing times in the gaming industry, more sophisticated scenario planning and forecasting are crucial tools for adaptability and success. In traditional budgeting, companies set targets with checkpoints through the year to aid alignment across the organization. They then forecast performance every quarter, typically through the end of the fiscal year. Annual plans are static, strongly determine where investments would go and often serve as benchmarks for executive performance measurement and compensation.

The static forecasting approach does not hold in today's uncertain times. Now, more companies are realizing the limitations of a static annual plan and the shortcomings of limited horizon forecasting. To correct this, they are beginning to implement a rolling forecast process that increasingly considers a range of potential scenarios, especially in today's economy. These scenarios consider different assumptions as drivers of performance, such as available discretionary entertainment dollars, currency exchange rates, player penetration on the various types of games and the general economic uncertainty.

With the movement to online gaming, old planning models and drivers may no longer apply. Traditional land-based gaming organizations need to become agile to anticipate, assess and adapt to the potential impact on their business model, which requires more collaboration between the corporate organization and the gaming sites.   

Continuous planning and forecasting for growth

Transporting traditional land-based games to the online world is a logical choice for gaming operators but an emerging area of skill gaming promises to expand the realm to new audiences. Skill games eliminate the element of chance and are a category separate from gambling that is legal in many jurisdictions in Canada, the U.S., and Europe.

The economy, combined with non-conventional performance drivers in this growing segment and online gaming in general, emphasize the need to migrate to a continuous planning mindset through the use of an integrated performance management framework. To achieve this, business strategy must be linked to targets and objectives in the business planning and reporting cycle that can be exercised and their connection must be widely understood throughout the organization.

An effective performance management process is a rolling, cyclical one that integrates strategic and operational control, planning and reporting to support all stakeholders, both internal and external. It also enables and drives decisions and actions for the organization, which will be critical given economic uncertainty and the emergence of new competing markets in the gaming industry.   

For the modern gaming operation, the key to reliable planning and forecasting is the ability to draw together culture, process, internal and external data into a balanced and cohesive framework enabled by technology. Reliable planning and forecasting can have an incredible long-term impact on a business, helping to improve the ability to identify new opportunities and manage potential risks.

Leadership for this necessary transformation rests within the finance role, where the planning and forecasting function traditionally resides. Finance must promote wider cultural change by putting forecasting at the centre of strategic decision-making, engaging with other leaders within the organization as well as key stakeholders to ensure that business plans focus on the things that really matter: Activities that generate cash and actions that promote responsible gaming.

By Chris Moore, Senior Manager at KPMG’s Canadian Advisory Services