Place Your Bets: Risk Management and the Gaming Industry

Beginning of article

The gaming industry provides an interesting example of an industry impacted by conflicting societal views, regulatory changes, technological growth and industry trends. According to the American Gaming Association, from 1992 through 2002, gross gambling revenue in the United States increased from $30.4 billion to $68.7 billion. In addition to fueling this increase in revenue, a number of key developments during the period have presented the industry with significant risk management challenges. All businesses face the risks that changing conditions present, but in the gaming industry, these factors clearly affect risk management strategies and lead to an increased focus in enterprise risk management. Expansion outside of Nevada, the proliferation of Native American casinos, the advent of online gaming and the threat of terrorism all make up a risk management landscape for gaming that has lead to the increasing use of enterprise risk management throughout the industry.

Leaving Las Vegas

Like many industries, the challenges related to growth opportunities create an array of risks. The expansion of casinos and other gaming establishments accelerated tremendously in the 1990s, and by the year 2000, casinos were present in 32 states. After 2000, however, the introduction of major new entertainment properties into new states began to slow. As a result, the industry has seen consolidations and mergers of mega-resorts, establishment of "racinos" (greyhound racetracks with slot machines), alignment with mega-mall sites, and expansion onto the Internet. Moreover, these developments have come at a time when Americans currently spend more money in casinos than on golf, the cinema, compact discs or cable television.

For years, state legislators have seen gaming as a source of revenue, job creation and overall economic growth and many have thus sought to create friendly environments for the industry. This has even led some Mississippi universities, for example, to propose new academic programs in gaming management. And today, some form of legalized gambling exists in all but two states--Utah and Hawaii.

Despite these positive indications, societal issues and increasingly organized opposition to gambling--especially from local environmental, political and consumer …