RFU hedging player bonuses is no gamble

The Guardian broke a story this week about the RFU choosing to hedge player bonus payments at this year's Rugby World Cup. The piece even made it to Australia.

The story highlights that sports betting markets were used to price and place the risk. Betting and sports are interesting topics for the man on the street and headlines sell papers but calling the coverage a gamble, which the article does is just wrong.

What happened is the RFU agreed bonus payments with the Rugby Player's Association (RPA) for performance at the Rugby World Cup in New Zealand. These bonuses are to reward players for the hard work and commitment involved in reaching the last 4 of the competition. Next the RFU looked at the potential payments in the context of their budget and decided to source a quote to "insure" the liabilities. They locked-in a price today so they can budget with certainty.

Most of the governing bodies are taking out this type of coverage and though it is available in the insurance market, the betting markets are better and more cost-effective when pricing this type of risk.

The type of market that a risk is placed in doesn't make it a gamble. The RFU is simply offsetting risk in the most cost effective manner available to them. Ryanair isn't gambling when it hedges fuel costs by "betting" on oil and neither are the RFU in this case.

Press release: Sportsrisq agrees $50M sponsorship deal with Gareth Maybin

European Tour golfer, Gareth Maybin has agreed a sponsorship deal with leading sports risk advisory Sportsrisq Capital that includes bonus payments of up to $50m. The landmark deal is believed to be the largest sponsorship agreement ever signed in professional golf. 

John Nagle, Managing Director at the London based company said “We’re delighted to be backing such a promising golfer as Gareth. He has the potential to be a major force on the tour for years to come and we’ll hopefully be along for the ride.” 

The eye-watering bonus structure is made possible because of Sportsrisq’s expertise in pricing performance. Nagle said “We were able to leverage that to create and manage the bonus structure. All the risk is placed through our risk capacity partners so we can cheer on Gareth without worrying about the huge liabilities.” While the exact details of the structure are confidential, it is primarily based on tournament finishing positions and The Race to Dubai rankings. A cumulative effect would trigger the $50m payout. 

Bonus structures are an integral part of most sports sponsorship deals. 

With the Maybin deal Sportsrisq was able to showcase their product in a way that was both relevant and easy to understand. “Our clients are sponsors and agencies so this is a great way to show the possibilities of what we can do. At the same time we’re demonstrating our commitment to professional sport by becoming a sponsor. We’ll continue to explore innovative sponsorship opportunities as we grow.” 

Conor Ridge of Horizon Sports Management, Maybin’s management company, said “The Sportsrisq deal represents an exciting, new type of sponsorship deal that both Gareth and Horizon are proud to be involved with. Gareth doesn’t need any more motivation but the prospect of $50m certainly won’t hurt!” 

Sportsrisq Capital is an independent sports risk advisory based at 36 Jermyn St, London SW1Y 6DN. www.sportsrisq.com.

Gareth Maybin is a European Tour golfer from Northern Ireland. He is managed by Horizon Sports Management. www.horizonsports.ie