The sports betting market - as well as the booming eSports betting segment - continues to show impressive growth figures. According to Statista, the industry is expected to exceed $65 billion by 2029, a growth rate of almost 7.5% per annum, according to experts. However, the risks associated with doing business in this very promising area are increasing in parallel. From unscrupulous customers to internal infrastructure that often fails to keep up with the latest trends, there are many challenges that require effective risk management in sports betting.
In recent times, operators are faced with both opportunities and potential risks. Therefore, effective sports betting risk management is the foundation of success for any online betting business. This article covers all the important features of running a sports betting business and advises on how to be successful at sports betting in 2024 and beyond.
Hundreds of thousands of bets passing through a platform, unexpected outcomes of clashes and creative fraudulent schemes - this is what operators face every day. Without reliable betting risk analysis, you are in danger of turning your business into something akin to a casino for yourself. Through competent risk management, bookmakers maintain that all-important balance between profit and security, anticipate threats and - most crucially - earn the trust of their customers.
Today, running a sports book without effective risk management is a venture doomed to failure. Below, you will find the key benefits of risk management that are hard to underestimate:
· You're gaining financial stability. To remain competitive, sportsbook operators are forced to operate with minimal margins. Just one major loss due to unrecorded risk can drain an operator's budget. Using an effective risk management system, betting companies monitor lineup overcorrection, limit bets on suspicious events and thus keep profits afloat.
· You eliminate most fraudulent schemes. Thanks to AI-based big data predictive analytics, operators detect abnormal user behaviour such as multiple accounts, bonus hunting, spikes in betting on niche events, etc.
· You provide a fair playing environment thereby increasing the users' sense of security. By utilising predictive modelling systems, bookmakers form correct odds to prevent any manipulation.
· You conduct your business in full compliance with applicable laws. Thanks to competent risk management, you can easily integrate AML and KYC standards thereby minimising the chances of being penalised by regulatory authorities.
· You react to any changes almost instantly. In addition to traditional pre-match betting, many operators also offer live betting where the need to adjust odds quickly due to the unpredictable nature of the sport is essential.
Finally, arbitrage and forfeits have become a real scourge for sportsbooks, as many players find differences in odds between platforms and use this to guarantee a win. Without quality AI data analytics, you will not be able to identify and block bettors using forfeits promptly.
How to create a reliable system capable of protecting your iGaming business today? The first step is to recognise and understand the risks a business may face in a competitive environment. Below are the three main categories of risks that bookmakers must deal with effectively.
The inability to manage financial flows means that you will fail with your sports betting business. For example, running out of liquidity before covering winnings is a terrible scenario for a betting company. In addition, failure to control the impact of markets and individual players - as well as the inability to adapt to an ever-changing regulatory environment - threatens to shut down your business altogether.
Your business is not immune to technical failures of platforms, human error and fraud, both from players and third parties. Fraudsters have become very sophisticated in recent times, so proper risk management has become paramount. By betting from multiple accounts and using arbitrage, some dishonest bettors are robbing bookmakers of tens of thousands of dollars a day.
Did you know that in 2023 William Hill was fined a huge sum of around £20m? According to The Guardian, the breach of AML regulations and social policy has had serious consequences for the well-established bookmaker. To prevent such issues from arising, many operators are working with legal experts and compliance teams.
Built up over many years, a bookmaker's reputation can crumble literally in the blink of an eye. Fraudulent transactions and customer complaints often lead to a loss of trust from existing and potential customers. To avoid all this, you must provide the highest quality customer service and make the T&Cs as fair and transparent as possible.
It's hard to realise how many vulnerabilities and risks operators face in the market today. However, you can effectively counter them with awareness, quality analytics and modern technology. Below, you will find the main strategies and solutions enabling betting companies to successfully manage risks and thereby ensure their stable profits.
How do you detect problems before they occur? This is where modern systems capable of thoroughly analysing player behaviour come into play. They focus on things like group player behaviour, anomalies in lower league events and insider betting. This is done around the clock through a perfect symbiosis between engaged experts and advanced analytical tools.
Whilst many see betting limits as a restriction for punters, it's actually about protecting the platform from fraud. Every day, betting sites and apps are visited by thousands of players where there are both complete novices and seasoned pros.
As each group requires a different approach, bookmakers set dynamic limits, impose caps on high-risk betting markets and constantly adjust odds to reduce potential losses. With properly adjusted limits - which are constantly adapted to changing conditions – you can significantly reduce the risk of catastrophic losses.
Making low profits due to low margins, operators are constantly playing with probabilities. To minimise the probability of unpredictable results, companies balance their lineups to ensure stable profits. In addition, they adjust odds based on both sports factors and bettor behaviour. In some cases, bookmakers even resort to hedging bets by betting on other platforms to lower losses.
Today's threats require almost instantaneous decision-making. However, this requires monitoring and analysing vast amounts of information in real-time, which is unthinkable without the use of modern technologies, including advanced options such as AI and machine learning.
For a system to work efficiently, it must be able to monitor hundreds of parameters simultaneously. This is impossible to do manually in today's reality. Modern solutions are able to detect anomalies and automatically block bets to pass additional checks. In addition, such systems detect suspicious transactions, preventing troubles at the stage of depositing funds and withdrawing winnings.
AI is a great tool that has found application in many different industries, including iGaming. Thanks to its ability to work with large amounts of data and learn, it can simulate scenarios to show how risks vary with different approaches. It can also scrutinise user actions to identify potential threats in advance.
Given that the modern betting market is developing rapidly and trends replace one another almost instantly, you should rely on the practices of the leaders. In addition, you need to analyse the market yourself, monitor legislation and implement advanced technologies to minimise risks for your iGaming business.
In 2023, the UK announced stricter licensing requirements. To avoid penalties, operators had to strengthen KYC measures. This is just one example of the many times when sudden changes in legislation take betting operators by surprise. You can turn regulatory updates into your strategic advantage by keeping an eye on the law and industry standards.
In recent years, AI and machine learning have played an increasingly important role in the battle against fraud in the iGaming environment. Thanks to more powerful algorithms, modern systems can quickly identify suspicious behaviour and prevent bot attacks. However, beyond the use of AI-based solutions, there are several other important trends that cannot be ignored:
On the one hand, the legalisation of iGaming opens up new opportunities for operators looking to expand their business into new markets. However, on the other hand, the requirements for online casino and sportsbook platforms have significantly increased. Therefore, truly effective risk management today is the basis for a successful business in such a volatile and competitive environment as iGaming.
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