Clippers Managing Risk

Wow.  Donald Sterling sure made a splash this past week, hasn’t he!  I think everyone has an opinion on his status as the owner of the Clippers, the team itself, and on supporting the team in an ongoing way.  I’m not going to get into my personal opinions on this.  But, it’s interesting from an accounting perspective.  How?

Imagine you are Ed Lamb, the CFO of the Clipper’s franchise.   How could he have possibly predicted this?  What contingency plans should the organization have had in place?  The news on Monday was full of what sponsors are dropping their sponsorship of the team, who was reconsidering their deals, and fans were debating their continued attendance and support of the team.  It is inevitable that this will affect the short-term financial status of the team, and any good organization will have plans in place for something that might go wrong.  They might not have been able to identify this particular situation, but some kind of scandal should be included in their risk management plans JUST in case.  What is the team going to do without their major sponsors?  What will the team do if ticket sales go down?

I would hope that no company or organization would ever have to face such a situation, but it should be part of your managerial planning sessions to foresee things such as losing your biggest customer, losing several small customers that still represent a significant portion of your business, or if you were to face a lawsuit, how you would even pay for the lawyers you would need in the short term.  No business ever likes to think “worst case scenario”, but it is a vital and interesting exercise to see how your business could continue if something catastrophic were to happen to your revenue stream or professional reputation.