In the sports sponsorship world, more than ever, understanding geopolitical risks matters. When ideology variance across regions meets fast-evolving social trends – such as those around Diversity, Equality, and Inclusion (DE&I) and overall human rights – brands are likely to be caught in the middle. Embracing some risks is often desired, but how to mitigate them is often unclear.
- Global sport events, such as the 2022 Men’s World Cup in Qatar and the 2023 Women’s World Cup in Australia, have shed light to the significant cultural and political differences impacting brand positioning strategies globally.
- Against this backdrop, multiple controversies have represented reputational and even regulatory risks for businesses – particularly multinationals who want to do the right thing but might face challenges related to the lack of understanding pertaining local political and social environments.
- Growing ESG momentum among consumers and investors means that some risks are worth embracing, including in sports. However, risk must still be properly assessed and mitigated, especially amidst such a fragment and highly volatile geopolitical landscape.
- Success stories continue to include acknowledged identification of the intersection between local and global risk trends, the assessment of risks related to third-parties, and the implementation of risk management programmes that allow for quick and robust responses to potential controversies.
When opportunity meets risks
Sports megaevents represent major businesses opportunities, particularly for multinationals seeking to implement global brand positioning strategies. According to a 2022 piece by BusinessWire, the global sports sponsorship market alone represented almost USD 80bn in 2022 and is likely to continue to grow at a fast pace – projected to reach over USD 115bn by 2027. The opportunities, therefore, are multiple and diverse. And so are the risks.
An increasingly fragmented (and fast-evolving) geopolitical landscape coupled with the fact that ideology variance remains significant across certain regions and markets means that risks are rising exponentially. This is particularly valid for those in the Environmental, Social and Governance (ESG) sphere, which particular emphasis on DE&I and overall human rights. After all, although ESG is a primary global topic, ESG risks remain very much local. For example, a pro-LGBTQ+ rights initiative by a business that might be well-received by consumers and regulators in so-called Western countries might represent a major problem for its operations in markets in the Middle East.
This does not however, mean that companies should not embrace such risks – particularly if they are confident in their mitigation strategy from both a business and social perspective. There are, after all, conversations that require continued advancement among societies, including those around the promotion of human – including LGBTQ+ - rights. It does mean, however, that proper risk management is needed.
In this context, brand resilience is key. Every year, multinationals – typically from Western markets - publicly demonstrate their support for the LGBTQ+ community through various Pride Month campaigns, often displaying pride merchandise and marketing. Last June, a well-known supermarket in the US - amongst other brands, including a major sportswear company – faced significant right-wing backlash on the back of an increasingly polarised social environment vis-à-vis the issue; they were forced to reevaluate their Pride campaign approach. Boycotts, employee harassment and threats of violence prompted companies in the country to pull back some of their plans, underscoring the increasingly complex risk environment around human rights, including LGBTQ+.
Successful risk management
There is not a single recipe for geopolitical risk management. After all, risks vary according to a number of factors, including the company’s profile, the jurisdictions where it operates or wants to operate, and, mostly, the evolving political, social, and geopolitical trends associated with certain business operations. It is worth noting that new and fast-evolving consumer preferences brought about by millennials and Gen-z generations means that risk levels might change abruptly. On top of that, the world has experienced increased fragmentation, with the growing US-China rivalry and the rise of certain middle-powers representing a challenge to some longstanding cultural and business paradigms.
That is why a bespoke support model – such as the one extensively offered to Control Risks’ clients over the past decades – matters. It helps with the identification, the assessment, and the mitigation of relevant risk issues for each investment or operation, while ensuring efficiency in the process. There is, however, a set footing of best practices that must be generally considered. These include the deployment of tools, initiatives, or programmes such as:
- The assessment of the local-level risk landscape, based on local intelligence to support the identification of key trends, relevant threat actors as well as their intent and capacity to engage in initiatives that might threaten a brand or operation.
- The monitoring of emerging risks globally, as a means of anticipating trends that will impact certain markets – allowing for the implementation of proper mitigation measures.
- The conduction of timely third-party due diligence processes to mitigate indirect reputational and regulatory risks, particularly but not limited to jurisdictions where a company has limited knowledge.
- The establishment of tactical risk management teams with the capacity and mandates to respond to controversies in a timely and robust fashion. This is particularly valid for sports megaevents that receive significant attention by civil society and regulators, while also, often, short-lived.