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Online bookmakers have to face and deal with a lot of risk during every day of operation. Because of the nature of the business, multi-faceted risks have to be managed separately by specialists, including the obvious liability surrounding revenue. Online bookmakers run at low margins, which is essentially a small commission on every bet taken. But it means that major losses are potentially never far away.
The top licensed bookmakers worldwide - whether US, Danish, Spanish platforms or UK operators ranked by expert sites like Legalbet, which evaluate and list licensed sportsbooks - must maintain a strong line of defense across multiple areas. The bookmakers welcome hundreds of punters daily, process countless stakes, and need to ensure a seamless operation without financial setbacks or fraud, data breaches and any technological failures. Risk is everywhere, so how is it all handled?
Risk Analysts
One key area of online betting site risk management is analyzing betting patterns. With the help of machine learning and AI, statistical models are used to help predict what bettors are going to do, along with what volume of bets and of what type are expected to show up on a particular market.
Experts like senior risk analysts will keep a close eye on markets and look for things like a sudden surge of bets appearing on what is deemed to be a niche market. The bookmaker will be cautious about why a small market is attracting a high volume of bets that fall outside the expected data analysis predictions.
Such a thing could be an indicator of insider information that the bookie is unaware of. The risk for the bookmaker here is, of course, potentially sizable and unexpected losses on such a market.
Liability Management
The odds seen at online betting sites are not arbitrary numbers, but extremely precise calculations that fully take risk into consideration. Bookmaking companies lean heavily on seasoned traders to keep odds up to date, because any discrepancies can leave them exposed to potential losses.
To formulate accurate odds, the trading systems typically incorporate statistical data from specialist third-party companies. These release specific, detailed insights about particular leagues or competitions that the traders then use to help set their odds.
Traders use proprietary algorithms that help to translate all the incoming information into liability, which is a feature of all odds, as it’s the amount that the bookmaker has to pay out on winning bets. Traders have to ensure that markets are balanced, to offset as much of that liability as possible.
Detailed reporting is essential for analyzing odds performance in real-time. Any late team news ahead of a soccer match, for example, can lead to market fluctuations. So real-time data feeds have to be married with statistics that traders have to analyze.
Technology’s Role
Technology has helped bookmakers massively, being able to perform accurate risk management. Data analysis can rapidly identify betting patterns, but they can also be used to try and predict outcomes of events, which is valuable information that traders can use to help set their odds.
Meaningful insights can be extracted from machine learning, which can handle massive banks of data on the fly. Specific risk management platforms pull everything together from many sources that are relevant to a market, and provide the operator with a heavily detailed overview of their risk exposure on it.
At the same time, the reliance on technology comes with its own risks, as any weak points in an infrastructure could bring the house of cards down. Anything from server-side problems, to complete hardware failures poses the risk of revenue losses if a site goes down, so teams of IT specialists are crucial for managing systems.
Further Risks
Compliance officers also help in the fight against fraud and to aid responsible gambling. Systems like Know Your Customer (KYC), secure payment gateways and anti-money laundering procedures are all in place to help bookmakers battle things like underage and fraudulent gambling, which pose extensive risks.
The overall picture of risk management is enormous, complex and dynamic. It lives on the edge of real-time data systems managed by sophisticated technology but backed up by the human touch.
Continuous Challenges
Risk management, from reputation to regulatory issues and the setting of odds, is as complex and varied as the risks themselves. But the fact that the industry is booming and well-regulated indicates that those systems are working.