The True Cost of Playing Offside

By Robert Brown

Not without its own controversy, the World Cup in Brazil has managed to distract the world from allegations of corruption that threaten football’s governing body, Fifa.

The 2022 World Cup bidding process and subsequent awarding of the tournament to Qatar, which was originally welcomed as “a victory for the Arab world” by one of football’s all time greats, Zinedine Zidane, has since developed into an issue that threatens the reputation and value of one of sports most esteemed organisations.

Thankfully for Fifa it’s a non-profit organisation and unlike publicly quoted companies, relies primarily on its value as per its accounting records, and not its value as per market capitalisation.

However, for representative organisations like Fifa, intangible assets such as an organisation’s reputation are the most reliable indicators of value. Without a strong relationship with its stakeholders, an organisation such as Fifa could quickly lose much of its influence and eventually become redundant.

This isn’t to say that Fifa has reached this critical point, however allegations about payments made by a former football chief to Fifa officials in support of the Qatari bid have brought the organisation and its leadership to a crossroads. What determines their ultimate future will be the extent to which they engage transparently with the ongoing investigation with a view to protecting their well established brand.

In the meantime Fifa have a significant stakeholder engagement process to carry on with. Among its greatest threats is that to its commercial partnerships, and more specifically, its finances. Collectively, Fifa’s main commercial sponsors contribute over €1.1 billion over a four year World Cup cycle, providing a platform for their brands with the world’s most popular sport and its governing body.

However, these partners, which include BP, Visa, Adidas and Sony, are now forced to protect their own reputations by encouraging full accountability in an attempt to distance themselves from the alleged failed ethical processes of the sporting organisation. In a statement issued by Visa to the press, the global financial services corporation maintained that it expects all of its partners to ensure “strong ethical standards and operate with transparency.”

For these commercial partners, this issue has become a reputational threat by association. The focus for Fifa now is taking all necessary steps to address the issue, or potentially threaten one of its main revenue streams.

Supposing Fifa’s intangible assets are paramount to the value of the organisation, it’s a natural progression that any damage to its reputation, may also reduce its influence when negotiating future sponsorship revenues, and hence its overall value.

Transparency can and will determine the eventual outcome of this issue. Protecting the Fifa brand should be concern number one. Protecting its reputation will almost certainly safeguard its relationship with stakeholders. If allegations are true, at least the brand will have cooperated with investigations and demonstrated willingness for best practice corporate governance, and will by the end, have earned a reputation for those very attributes.

As is often the case in a crisis, honesty is the greatest cure.

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