Risk Management in Sports Sponsorship: Application to Human Mortality Risk

By O'Reilly, Norm; Foster, George | International Journal of Sports Marketing & Sponsorship, October 2008 | Go to article overview

Risk Management in Sports Sponsorship: Application to Human Mortality Risk


O'Reilly, Norm, Foster, George, International Journal of Sports Marketing & Sponsorship


Abstract

This paper seeks to build understanding of the evaluation of sponsorships involving high human mortality risk. Examples of risky sponsees are presented, with two assessed as in-depth case studies. Based on this research, a sponsorship evaluation framework for sponsors is presented that includes: sponsee selection, risk management, strategic tactics, contingency planning, contract elements and post-contract tactics.

keywords

risk management sports sponsorship sponsorship evaluation

Executive summary

Risk management continues to grow in its importance for organisations, their activities and their investments. When an organisation chooses sponsorship as a promotional strategy, it signs up to deal with the risks inherent in supporting a partner, or 'sponsee'. Simply expressed, the sponsor must weigh the potential benefits of a successful sponsee (e.g. Olympic gold medallist) against possible negative outcomes (e.g. poor performance, negative athlete behaviour, death). The risks inherent in pursuing high returns render sponsorship evaluation crucial--before, after and during the sponsorship. This paper seeks to build understanding of the evaluation of sponsorships that involve high human mortality risk. It does so by reviewing the related literatures, articulating the dimensions of risk in sponsorship, operationalising the high-risk sponsee and proposing a sponsorship evaluation framework for high-risk sponsees.

From examples of risky sponsees presented, two are assessed as case studies of expeditions, both in which the sponsees--mountain climbers--died tragically. The purpose of the case studies is to illustrate two specific and different instances of high human mortality risk in sponsorship and to construct a sponsorship evaluation framework for organisations to follow, to mitigate risk when investing in high human mortality risk sponsorship properties. Findings provide direction to practitioners for a variety of activities around high-risk sponsorship, including sponsee selection, risk management, strategic tactics, contingency planning, sponsorship contract elements and post-contract evaluation. Recommendations are also provided for future research.

Introduction

Sport is facing unprecedented levels of scrutiny from media, fans, governments and organisations. Whether because of doping, crime, violence, cheating or negative messages to youth, sport has been put under the microscope and its economic and social viability may have been compromised. As distressing as this might be to many in sport, these effects reach beyond sport itself to the corporate partners who provide considerable financial and in-kind resources to support sporting organisations, events and athletes.

Globally, the use of sponsorship has developed into an important promotional tool for organisations who invest in sponsorship (sponsors) and for the properties that provide the promotional value in return (sponsees). IEG (2008) predicts that sponsorship will grow to a US$43.5bn global business in 2008. Sponsorship literature has developed apace and is now considered to be substantive (Walliser, 2003).

Sponsorship has evolved from philanthropy to being predominantly investment-based, where sponsors typically select a sponsee based on business benefits possible from leveraging the opportunities that result from that sponsorship. The intensely competitive marketplace in traditional media, along with criticism of traditional advertising, has helped promote sponsorship as an alternative for navigating through the clutter (Seguin & O'Reilly, 2008).

There is a downside to sports sponsorship. Anecdotally, evidence exists that a sponsor is impacted by sponsee (athlete) death; be they mountain climber, racing car driver, wrestler or cyclist. For example, when stock car racing legend Dale Earnhardt crashed fatally in the final lap of the 2001 Daytona 500, his sponsors and the NASCAR organisation responded.

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