FIFA Risk Landscape and the Challenge Ahead

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If FIFA’s revenue reserves are anything to go by, it is evident that the international federation has been operating a very successful business model over the last four decades or so. FIFA’s business model revolves around the FIFA World Cup. Using funds raised from the quadrennial tournament, FIFA is able to carry out activities aimed towards developing the game of football – introducing the sport to new participants and geographies. This results in improved quality of the game and growth in spectatorship. Ultimately FIFA is able to secure more revenue mainly through its marketing and broadcast partners. FIFA’s business model innovation therefore focuses on growing the game and enhancing the experience of stakeholders including fans, players, commercial affiliates and broadcasters. Like any other organisation, FIFA’s business model faces risks that could be broadly classified into reputational, strategic and business risks. This article looks to expound on these 3 forms of risk and then narrows down to a challenge facing many football organisations in the coming decade – decreased fan involvement.

Reputational Risk

This is the risk associated with how the organisation, and its actions and products, are perceived by (potential) customers, suppliers and other stakeholders. This risk has been brought to the fore by the crisis that recently rocked the football governing body. FIFA and hence the FIFA World Cup risk losing the support of big corporate sponsors and broadcasters greatly impacting its business model. According to an article in the Financial Times in April this year FIFA was struggling to get sponsors for the World Cup in Russia, having only secured 10 companies. Around the same time prior to the World Cup in Brazil, FIFA had 20 sponsors on board. Big corporates leverage football’s global spectatorship to showcase their brands paying FIFA millions of dollars in return. Branding innovation has been a major aspect of FIFA’s business model throughout the years hence reputational risk would greatly impact FIFA’s business model innovation. Closely linked to this is legal and regulatory risk with authorities now demanding closer scrutiny of FIFA’s activities.

Strategic Risk

FIFA’s business model involves a lot of strategic decisions. For example, in its goal to grow the game geographically and demographically the organisation faces a lot of uncertainty. Case in point being repeated attempts (and failure) to sell men’s football in the United States of America. Women’s soccer on the other hand has been a success in the same market. Another area could be with regard to how much to innovate especially relating to technology. Recent technological innovations include the goal-line technology and Video Assisted Referees (VARs). Although good for the game, these innovations could take exciting (read controversial) incidents away from the game. As a result, the adoption of these technologies has been very slow and is preceded by extensive testing.

Business Risk

Business risk includes a range of risks such as the uncertainty about potential sales levels in different markets, or the cost of the producing goods and services in those markets. This is well captured in FIFA’s decision to host the 2022 to World Cup in Qatar a move meant to spur the game’s growth in the region. The unfavourable weather conditions have meant that the country has had to spend billions in infrastructure including artificial cooling of stadiums. This is after the decision to move the event from July to December, a decision that could impact sales as the European football calendar is usually midway at this time of the year. The awarding of the FIFA World Cup to Qatar is also shrouded in a lot of controversy compounding the federations reputational risk, explained earlier. 

Qatar won the bid to host the 2022 World Cup

Now to narrow down, FIFA and football in general is facing increased business risk due to decreased fan involvement leading to lost revenue and under-utilisation of sports facilities. This is as a result of different factors, including: diminished fandom in the modern era, that is, a lost sense of ownership of sports teams and clubs; challenges understanding spectator demographics impacting marketing strategies; technology advancement that has enabled the consumption of sporting products/services away from stadiums; safety and security concerns (including terrorism), that can result in many staying away from sports stadiums.

In order to counter this challenges a multifaceted approach is required to address the various factors. First, it is important for football organisations, including associations and clubs, to get more involved in local community activities in order to build or rebuild a loyal fan-base. In the case of clubs, the local communities in which they are based should serve as the primary source of talent, both sporting and non-sporting. This especially applies to small and medium-sized clubs without a globally-recognised brand.

Secondly, sports organisations should take advantage of the rapid technology changes by embracing innovation. Making full use of the third platform, that is, mobile computing, social media, cloud computing, and data analytics (big data), and possibly the Internet of Things should be on the agenda of clubs and teams. For example, NFL and stadiums in the US have in the recent past been improving fan experience by drastically improving Internet connectivity in stadiums, a key factor in keeping fans, especially millennials, coming to live events. This area still remains largely unexploited by most sporting organisations and represents great potential in improving fan engagement, and subsequently revenue growth. Another example would be the use of big data analytics to understand fan behaviour and demographics in order to better tailor products/services to their needs.

Sporting organisations such as FIFA also need to come up with better business models in order to deliver value to customers and achieve profitability. Ticket pricing models would especially benefit from such a review. An interesting observation is how the introduction of all-seater stadiums in 1st and 2nd tier English football leagues impacted stadium attendance. Although a positive move that improved safety and fan experience, the move priced out students and the unemployed. Business model innovation is required to address such issues and indeed there has been recent discussions around the reintroduction of standing areas in stadiums!

Third, it is important that sports leaders/organisations strengthen links with local and national governmental authorities in order to address issues related to safety and security. For example, hooliganism has been a threat to sports spectatorship, especially in football, as was witnessed during the 2016 European Football Championship in France. Closer working relationship between sporting bodies and authorities should help curb this vice, attracting more people to live sporting events. An even bigger threat now is terrorism. Although we are yet to witness any major incidents in a sporting event, terrorism remains a major threat in the coming decade. Again, close cooperation between sporting organisations and authorities will be key in addressing this issue. Proactive measures need to be taken to ensure fans feel safe and secure when attending sporting events.

Granted, the road ahead is not smooth for FIFA as well as similar organisations in the sports and entertainment industry. However, with careful planning around risks and following an innovative approach in tackling the challenges that lay ahead, such organisations will survive and even thrive. FIFA has already outlined its plans for the future in its strategy released late last year, titled FIFA 2.0: The Vision for the Future. This is a first from FIFA and indeed a positive if well executed and supported by the organisation’s vast network of stakeholders.

 

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