clock menu more-arrow no yes

Filed under:

Risk vs Reward: How Do You Make That Determination

New, 2 comments

The Ciao deal is dead and everyone wants to assess blame. Is that the right thing to do?

Ron Chenoy-USA TODAY Sports

The shirt sponsorship between the Colorado Rapids and Ciao was a watershed moment for the club.  Unfortunately, as we are all aware, it did not work out:

With this news there is the propensity to want to assess blame.  I get that.  We want to be able to say either Ciao or the Rapids were the guilty party in all of this.  It is much like when a sports team looses a game.  We, as fans, want to look at someone to blame for a loss.  So are the Rapids to blame?  Or is Ciao to blame?  Did the Rapids do their due diligence or did Ciao dupe the Rapids?  Some supporters clearly want to lay the blame at the Rapids on this deal and say that the Rapids did not make sure that Ciao had the proper financial structure to make this kind of partnership.

The issue with that thought process is that, when you say the Rapids are at fault, is that you are saying that they did not complete due diligence on Ciao.  Let me tell you a little bit about due diligence.  The point of doing this is to minimize your risk when dealing with a company, business or client.  Banks, Cell Phone Companies, Credit Card companies, etc do it all the time.  When you open an account with them they are taking a look at you and making a determination of the risk that you pose to that firm.  They ask this question:

"Does this customer's risk position make it worth it to do business with them?"

It is not an exact science.  You do your best to minimize risk but it is impossible to eliminate risk. Some people are not going to pay their bills.  Some people or businesses go bankrupt.  It happens.  The point of due diligence is to examine a risk that a potential customer or client poses to your business and make a decision whether or not you are willing to accept that risk level.

This is what the Rapids did with Ciao.  They did their due diligence on Ciao.  They made the call that the risk was acceptable to the club.

And you know what?  It did not work out.

Do you think when the Colorado Rockies signed Mike Hampton in 2001 for $121,000,000 that they expected him to go 21-28 with an ERA over 5?  Nope.  They did their diligence and it bit them in the butt.

Do you think that when the San Diego Chargers drafted Ryan Leaf that they thought he would become one of the biggest busts in sports?  I bet they did not.

Look, I get that people want to blame someone on the Ciao deal.  But my larger point is not to lay blame, but to look at it this way: the Rapids were a charter member of the league for 19+ seasons they did not have a shirt sponsorship.  They tried with Ciao.  It did not work out.  Was the risk worth the reward?  You bet it was.

For success is never found without a fair bit of failure.  The partnership with Ciao is over, and now it is time to look ahead as to who the next shirt sponsor for our Beloved Burgundy Boys could be.