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Risk-based gaming regulation: What to consider when making the shift
By Terry McInally and Nav Sandhawalia
April 1, 2016


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Risk-based gaming regulation: What to consider when making the shift

Businesses today are under constant pressure with expectations to manage more with fewer and fewer resources – this is no different for regulators in the gaming industry.

Given this “more-with-less” climate, the new trend of shifting toward a risk-based regulatory compliance model has started to take hold across many industries – from banking and investment, to fisheries. The shift has now reached the gaming industry as Canadian regulators are starting to embrace the risk-based regulatory model to increase efficiencies, effectiveness of oversight, and improve regulatory outcomes.

Regulators are realizing that risks can often be more effectively managed by focusing on outcomes and allowing operators autonomy when implementing efficient methods to meet regulatory requirements. Take for example, the task of keeping minors off of a casino gaming floor. Historically, a regulator might specifically require a prescribed number of security guards at each entrance in order to comply with regulatory requirements. In the risk-based model, rather than dictating exactly how each casino should prevent minors from gaming, this approach would allow the casino operator reasonable flexibility — whether it’s checking identification of every individual entering, adopting a blend of identification checking and facial recognition, or random identification spot checks — the regulator may subsequently be more or less rigorous with ongoing compliance activities, guided by a risk assessment of the casino operator’s chosen approach.

As gaming regulators assess this approach, regulated entities need to think about how these changes will affect their business. Transitioning to a new or modified regulatory model is by no means an easy feat – it is without a doubt part art, and part science.
 

Change is constant

So back to where this lead, some have also told me that taking as long as it has may drive changes in who is interested in becoming operators in Ontario. This is a very valid point and the list of those bidding might well and likely will be different then it would have been back when this started in March, 2012. Remember though, the last four years have seen big changes in the money markets that collaborative efforts depend on for financing. Mergers, acquisitions and bankruptcy protection all play a part in corporate direction and decision-making. It brings to mind that old saying by Heraclitus, “The only thing that is constant is change,” that is still relevant today. Let’s also remember that time wasn’t the only enemy of success, clarity needed to be sought and that involved engagement with municipalities across the province. So in many cases as the fog lifted on communities’ willingness, or lack thereof, to participate, some potential players felt differently about the opportunity. That was to be expected. I am positive that those participating with the remaining bundles up for grabs will achieve modernization’s objective handily.

Improved customer experience

As someone now on the other side of the process, I am still excited by the potential to serve the customers of gaming in Ontario better then the current structure could do. Investments in the bricks and mortar, expansion of amenities, the addition of table games and slots along with the placement of new facilities for the convenience of customers will go a long way to improving the customer experience that in turn will drive loyalty.

One of many upsides that operators will quickly recognize as improving the value proposition of their significant investments is the fact that current gaming employees in Ontario get it when it comes to delivering outstanding customer service. You can’t (OK, actually you can) but a price tag on already having a superior service culture as opposed to having to start from scratch. Remember, as it relates to gaming, the employees are the secret sauce in this transaction — they might well be the answer to how Cadbury gets the liquid in its chocolate bar, metaphorically speaking.

Experts say it takes five-plus years to change the culture of a company. That just won’t be required here. Sure, new folks will make adjustments to ensure that practices align with their corporation’s culture but OLG and resort employees have demonstrated that they are very adaptable to change. The added bonus is that relationships have been established and nurtured for over 20 years in the province. New operators will quickly discovery that they won’t have to fix what isn’t broken they will simply build their success on its solid foundation. Granted, they might say it’s what they bought and they will be more then right. The good news is that they can now invest training and development money in areas that will take the employees and managers to the next level to better suit the enhanced product offering and amenities that they will now be delivering to customers.

Steps in the right direction

So what really is there left to do and how long will it take? Well it doesn’t take much to recognize with only one down there are still six RFPs to go on the gaming side of their business. I am sure that OLG’s team, which we all know has undergone constant change over the same four year period, at almost every significant level with both the executive and senior leadership tiers, is anxious to move forward. They have worked hard to refine and adjust the plan. They have the integration of horseracing as part of the strategy now front and centre as opposed to being out of scope (which I know they take seriously) and they remain very conscious of how important getting on with this is — to the proponents, to the government, to the host communities, to the employees that they value dearly and most importantly to the customers that will be the benefactors of a 21st century gaming offering created and delivered as they want it. After all, as someone else once said, “if you’re not doing it for the customers, you shouldn’t be doing it at all.”

How long does that add up to in time? My guess is as long as it takes!
 


About the author:

Larry Flynn, C.Dir., is the retired Senior Vice President of Gaming for Ontario Lottery and Gaming where he was responsible for oversight and management of all OLG’s 24 gaming properties. Previously, Larry spent 26 years with the LCBO where his last role was SVP, Merchandising. Larry is a recipient of the 2012 CGA’s Industry Leadership and Outstanding Contribution Award. Larry is now the Principal of 2 Vice Advice Inc., offering consulting services to the Gaming and Liquor industries and also a Partner of Marinelli and Flynn, Gaming Advisors. Contact Larry at larryflynn@2viceadvice.com.

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