Simon Trim CEO of Sporting Group gives an in-depth product breakdown of Sporting Solutions new Risk Management Services (RMS).
A key product launch for 2018, Trim details to SBC readers Sporting Solutions fresh approach to industry risk management dynamics, seeking to develop operationally smart functions for all stakeholders…
SBC: Simon, thanks for the interview. Why is Risk Management Services such an important project/product launch for Sporting Solutions and Sporting Group?
Simon Trim: RMS is truly unique to the industry in the combination of functions it allows operators to outsource: price coverage, risk management, analytics and back-office operations. It’s unmatched in its flexibility and scalability, giving lotteries and private operators access to best of breed outsourced sportsbook solutions and freeing valuable resource to trade sports and competitions where their local expertise allows them to deliver the greatest value.
A key component of RMS is our automated “Risk-Adjusted Pricing”, which is a product of combining the market making the expertise of Touchbet with one of Sporting Group’s core competencies – namely a 25-year heritage of trading the most sophisticated and volatile form of sports risk. It represents a significant, but natural, next step for the business based on our core competitive advantages.
SBC: As an industry technology and leadership veteran, how has Risk Management evolved as an industry discipline? What do operators want, and what have suppliers delivered to date?
ST: To date, the supply chain for sports betting has centred around additional content for operators trying to expand topline revenue. Sporting Group’s skills in pricing and trading has obviously been central to that growth but the management of the resultant risk on those prices has largely resided with the operator. As a result, risk management as a service has remained a relatively nascent part of the industry, and the processes in place in many operations are often heavily manual, subjective and reactive.
However, it is well documented that the industry landscape has become harder for many market incumbents, driven by the increase in POC type-regimes, escalating cost pressure and the ever-spiralling complexity of operations. Sportsbooks are looking to find further efficiencies in their business, whilst at the same time trying to maximise customer experience and optimise their margins, rather than just reduce costs.
To satisfy this operator demand requires a much more skilled sports betting supplier than someone who can only provide additional data and content. Whilst sportsbooks have a need and desire to outsource further, the business processes that they are looking to move are the ones that require deep sportsbook expertise and domain knowledge, so previous operational experience is essential.
Neither operators or lotteries are going to outsource specialist business functions (like risk management) to suppliers that have never run a book, taken a bet or managed customers directly themselves. Similarly, for lotteries especially, they aren’t going to outsource these functions to a competitor already operating in their domestic market and targeting the same customer base. It is for this reason that we feel our RMS service fills an important gap in the supply chain that no one else can fill.
SBC: Sporting Solutions has focused RMS on developing ‘operationally smart’ functions for its clients. How have these sought-after dynamics, influenced your firm’s approach to developing and building its RMS tools?
ST: RMS leverages several tools developed in-house by both Sporting Solutions and Touchbet, and brings them together to service the industry in a new and pioneering way.
In terms of combined experience the Group is the global leader in sports spread betting since 1992, has successfully automated market making and risk management since 2006, delivered a best-of-breed B2B sports betting content and liquidity proposition for over a decade and, in recent years, built customer analytics tools capable of deciphering valuable “skill signals” from anonymised datasets.
Putting these aspects together means we have the unique capability and expertise in understanding how to deliver a market leading, differentiated, objective, efficient and scalable sportsbook offering. Coming back to the previous point, this satisfies our partners’ demands for an improvement in their customers’ experience whilst generating improvements in topline revenue and providing greater cost efficiency.
We have built this sophisticated trading proposition around a proprietary technology stack and, because it is designed in a modular fashion, means various elements can be deployed alongside operators’ existing technology with a very simple integration and no technical “switching risk”.
SBC: Risk Management is now a core dynamic in bookmaker’s day-to-day operations; retention, player evaluation, marketing, etc. Will this emphasis on RM test industry ‘legacy values’ or make them redundant?
ST: We feel that the risk management we are now making available as a service has the potential to fundamentally change the way that operators manage their exposure going forward. This is due to three core component factors of RMS – the combination of expert modelling and trading skills to generate initial prices; an overlay of automated price adjustment based both on actual exposure & predicted macro market movements, and price refinement on a per-operator basis according to a microanalysis of the client base.
As a basis, we are rigorous in our approach to building and iterating highly accurate, statistical sports algorithms for a wide range of sports, based on over a quarter of a century of in-play data – more than any other operator or provider anywhere in the world. Additional expertise is overlaid where necessary by utilising traders that have been educated through our accredited “Trading School of Excellence” training scheme.
As exposure is generated on the operators’ book, prices are adjusted for risk using the methodology largely developed by Touchbet. This has evolved from the market making expertise they have derived from handling an average betting volume of approximately €4bn per year almost entirely through automation.
The use of Profile – an existing Sporting Solutions customer analytics tool – means the operator is trading fully-optimised prices tuned on the specific information that can be derived from their own customers’ activity, rather than a proxy of information derived from market monitoring. This means that our partners now have access to an objective, bespoke, volume-based risk management service for the first time.
The outcome is that RMS is both a cost-saver and margin-driver for operators. As it is agnostic to the incumbent technology stack the service is available to both legacy operators and more technologically agile ones. In addition, as we make our range of pricing algorithms available through our “self-trade” service, operators can maintain pricing and trading control of the local expertise they’ve worked hard to develop, rather than cannibalising it.
SBC: In 2017 we have seen a set of new pressures placed on bookmakers with regards to social responsibility, cost and margin control. What part does RM play in controlling or adjusting to these factors?
ST: Part of the Sporting Group, Sporting Index is one of the most regulated firms in the industry and is based in the UK – one of the most regulated markets in the world. As such, we recognise the commitment and requirement that our partners have in relation to their TCF and AML responsibilities because we have them ourselves. However, whilst social responsibility and customer care is always the most important priority for us and our partners, businesses still need to generate returns for their stakeholders.
As a result, operators are having to carefully balance their regulatory and care requirements with maximising revenues when embarking on product developments and marketing campaigns. Within Profile is a “Welfare” rating, specifically aimed at flagging customers who may be at risk of harm according to the type of betting behaviour they are exhibiting. This is a feature that we continue to develop and improve and is aimed at giving our partners the information required to fulfil their social and regulatory obligations.
SBC: Finally Simon, you have delivered RMS, how do you see this service growing in 2018 and beyond…What is next for Sporting Solutions’ products?
ST: We are very proud to partner with Danske Spil for our RMS service, especially as they are a market leader and one of the world’s most forward-facing lotteries that offer sports betting. First and foremost, we are looking forward to going live with them in early 2018 and continuing our conversations with other interested parties for RMS.
For the reasons outlined earlier, now that there is a supplier that can deliver specialist trading functions to the market we would expect an evolution towards wider business process outsourcing, rather than just outsourced content. We will utilise the latest technology to build on RMS functionality, continuing to take the heavy-lifting off operators’ back-ends and empowering them to direct resources towards their brand proposition where they will be of most benefit to them.
We have some exciting next steps in the pipeline for building out our risk management and liquidity provision services for operators, and delivering these will be the focus for us in 2018 – watch this space!
Simon Trim – CEO @ Sporting Group
Industry innovation & operational stragtegy will be discussed and debated at the will be discussed at the upcoming ‘Betting of Football Conference’ (#bofcon2018 – Stamford Bridge London -20-23 March 2018). Click on the below banner for more information