Review of the Registered Clubs Industry in NSW - Clubs NSW

10 Helping clubs better understand the risks and benefits
of diversifying their operations
10 Helping clubs better understand the risks and
benefits of diversifying their operations
In the corporate world, diversifying into new operating areas can be an effective
strategy for some businesses that seek to reduce their risk and improve their
shareholder returns (or financial viability). However, it is not a universal strategy.
Some businesses choose not to diversify, while others have pursued and then
reversed diversification strategies.
In the registered clubs industry, IPART has found that diversification has, at best, a
mixed record of success. Specifically, it is not proven as a means of reducing (to any
great extent) clubs’ reliance on the revenue and net contribution from gaming
machines to support their provision of facilities and services or improve their longterm
financial viability.
However, there still may be merit in clubs seeking to diversify their sources of
revenue. In specific circumstances, diversification can be an effective means of
expanding a club’s revenue base, broadening its market appeal, and maintaining its
relevance by offering additional services to its members and local community.
The sections below provide an overview of the potential for diversification to help
enhance clubs’ financial viability – both in theory and in the experience of clubs in
NSW – and discuss IPART’s key findings and recommendations in relation to
diversification.
10.1 The potential for diversification to improve clubs’ financial viability
In general, businesses consider diversification strategies for a range of reasons,
including (but not limited to) the following:
Where a business sees an opportunity to increase shareholder returns or reduce
risk or exposure to a market or product. This may be by entering into a new
business with high margins or with unmet consumer needs, or by spreading
operational risks across various lines of business and thus reducing variability in
profits.
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