Risk Management in Casinos

Traditionally, risk management in casinos is viewed exclusively in the lens of financial instruments like acquiring insurance. By creating financial hedges to casino's liquidity, preservation of the casino's resources from the risk of loss due to decision-making can be possible. In the contemporary view, however, risk management in casinos is considered an integrated process and risks are deemed to affect the whole operations of the casino. As a result, traditional management techniques are directed to particular problems in order to operate the risk management system of casinos.

The first task is to identify, for example, the occurrence of potential loss in the key departments of Las Vegas casino or Mohegan Sun casino and evaluate the impact of such losses to the financial attribute of these casinos. This phase is done in a proactive manner. The second step is to select among the identified risks those that will be disengaged in management decisions and those that will be retained and controlled to reduce the severity of the possible loss. For example, in Fallsview casino or Winstar casino it can be quite distorted to accept losses, but these losses are elements of a certain corporate activity that cannot be entirely depleted. In this stage, coordination and expertise of the involved casino managers are crucial to rationalize retained risks.

The third level is to inform the budget department of the casino if they have the financial capability to absorb the retained risks. If not, those activities could be transferred to other capable companies. This situation can be illuminated by Reno casino and Casino Arizona wherein internalization in these casinos mean huge amount of risk exposure.

The fourth step is the implementation stage wherein managers of casinos allocate the scarce resources from the programmed risk retained activities to people, money and time. In the Australia Casino Hotel and Foxwoods Casino, this includes activities such as safety program for employees, purchasing insurance and provision of petty cash revolving funds. At the end of the process, monitoring of the internal (improvements in net income) and external environment (federal regulatory changes) is necessary to identify the need to restructure the existing risk management model for the casino to obtain optimal use of its resources and economically leverage risks.

On the other hand, a casino limiting its decisions and gambling activities within the veil of being risk-verse loses entrepreneurial opportunities which are important to growth and innovation. As the casino does not have such culture, it will also have effects to dependent and mechanical employees, technology remains stagnant, decisions tend to be reactive rather than proactive and loose competitive aggressiveness crucial to outperform competitors.

In today's hypercompetitive and fast-phased casino landscape, there is need of a systematic and continuous assessing mechanism for an enterprise risk. Risk management in casinos operates like an alarm clock wherein casinos can be assured that it ventures to certain risks wherein the path towards achieving their objectives is sustained. Through risk management, the casino can understand the interdependency of risks, their nature and potential impacts to the organization. In addition the approach is holistic that the entire casino actions and strategies are studied to succeed in the program wherein internal auditors are key people in its implementation.