Potential negative outcomes from sponsorship for a sport property

Sponsorship funding has become a staple source of revenues for many sport events, but there are two types of potentially negative outcomes for properties that may be associated with it: operational risk and reputational risk. Operational risk occurs when sponsors insist on changing the rules or format of the event, or when they exercise undue influence on its content, timing, location or participants. The primary source of reputational risk is increased public sensitivity to the negative health impacts of some product categories, most prominently those of tobacco, alcohol, gambling and products that are high in fat, salt or sugar that may make it contentious for a sport property to partner with companies in these product classes. Similar controversy from public sensitivity may emerge around issues of corporate social responsibility, as expectations grow regarding the impact of a company’s actions on society. Reputational risk also may emanate from over-commercialization of an event, since this may erode “fan equity”, i.e. the passion of fans who traditionally have supported it.