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Risk Management in Sportsbook Operations
The sports betting market is developing fast, and more and more sportsbooks are becoming available for punters to bet on. One of the most important elements of a successful sports betting platform is a well-thought-out risk management strategy. Slotegrator experts suggest looking at some aspects of risk management for sportsbooks and analyzing their role in the platforms’ success.
Risk management in sportsbooks
First, betting platform operators should remember that it is crucial to provide the best possible player experience while still being able to manage risks. In every sports discipline, there are increasing numbers of expert sports bettors who can cut into operators’ profits. But how can operators limit bets from unprofitable players without creating restrictions on the profitable ones?
There are two ways in which undeveloped risk management may hurt operators’ profits:
- An overly restrictive system: if bet limits are too low, or operators are too aggressive towards sophisticated players, both unprofitable and profitable players will stop betting.
- An overly generous system: if bet limits are too high, or operators are too encouraging towards sophisticated players, successful players will bet and win large amounts, lowering profits for operators.
Developing a successful risk management strategy is a complicated process that requires a detailed analysis of players and events.
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How can operators develop risk management strategies?
- Analysis of players
Operators should have in-depth knowledge of their customers and learn more about them from every bet they make. First, it is important to understand the player and decide which category he or she belongs in:
- Usual customer;
- Winning player;
- VIP customer.
If the player is new, operators should look at how large the bets he places are and how likely he is to win.
With each bet, the operator should gain customer knowledge and analyze how the specific player will impact the sportsbook’s margin in the long run. New players can be compared to the existing ones to predict their future profitability.
- Analysis of events
Different events carry different risk assessments. Operators should consider:
- The odds;
- The profile of the event and the amount of publicly available information;
- The sources of information players use to bet, etc.
- Special tools
In addition to gaining knowledge about the player and understanding the risk level of the event, operators should use back-office systems that detect unwanted betting behaviors.
These tools usually help operators gain information in some key areas:
- Very high bets placed by players from the usual customer segment;
- Aggregated risk;
- All bets placed by sophisticated players, etc.
The system should also set a risk limit for each sporting event in order to define how much an operator can risk on an outcome. This will determine the maximum amount a player can win on an event. If bets are too high and the limit is reached, the operator can choose to adjust the odds, take on a larger risk, hedge some of the risks, or stop accepting bets.
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Well-developed risk management plays an essential role in a sportsbook’s success because if operators are able to manage risks, long-term profitability is guaranteed. Efficient risk management depends on classifying players correctly, understanding the risks associated with events, and using the right back-office tools. Operators should have a high-quality automated system aimed at managing risks, as well as being able to make important decisions themselves.
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