By Ray Wallin
Risks are everywhere. Any money you invest in the stock market has the potential to return a profit or lose you money when that clinical trial fails. You take a risk every time you get behind the wheel of your car. You take a risk when you buy yesterday’s sushi at half price at a gas station.
There are also plenty of risks in playing the races. Folks that make their living playing the races know them all too well. Most importantly they know how to identify, measure, and mitigate them to remain profitable.
What types of risks do handicappers face?
1) Strategic Risk
Like a successful business, a successful handicapper needs a well thought out plan. That plan needs to be adaptable with how quickly the game changes around them. In this case the risk is that your strategy becomes less effective and you struggle to meet your goals and stay profitable.
We all know a guy like Frankie Figures. He came up with a great power figure for every horse. It was a recipe of one cup speed, two cups pace, a cup of class, and a dash of form. It seemed like he couldn’t lose, until he did. Now he is another degenerate scrapping around the track holding onto the hope that his magic figures will work again one day. He had a plan and it stopped working, but he failed to accept that fact.
As Mike Tyson once so eloquently quipped, “Everybody has a plan until they get punched in the face.” Just like getting punched in the face by a heavyweight champion, handicappers need to be able to adapt their plan if it stops working.
2) Compliance Risk
I would hope that everyone reading this is following all the laws and regulations regarding wagering. This could mean using the state-approved racebooks or sportsbooks offered where you live. This could also mean proper tax reporting.
The protection a U.S. based gambler has with offshore books is not guaranteed. Generally if you get stiffed, you have very little recourse to recover your money.
The same holds true when you place your bets with Billy the Bookie. Who is guaranteeing that he is going to pay you out on a big score? You don’t know if he is a snitch and is helping law enforcement make a case to take down a larger betting ring. I don’t think he’d appreciate you patting him down to see if he is wearing a wire anytime soon.
Do you remember the 2002 Breeders’ Cup “Fix Six” betting scandal? Forget the guys who were trying to scam the game from the inside for a moment. The bettors who won 5 of 6 would later get an additional purse distribution. How did they know who hit 5 of 6? The payout was $4,606.20 for a $2 bet, which would require you to pay tax on the winnings. Many horseplayers would find someone who had a lower income to claim the winning ticket on their behalf for a small fee so they could avoid paying the tax themselves. Yet, when the 6 of 6 winnings were redistributed, the names of those who claimed the tickets got the extra payout of $39,000.
You have too much at stake to get mixed up in wire fraud or doing something that will get your knee caps broken.
3) Operational Risk
Many handicappers are now playing most of their action from the comforts of home. This helps to reduce the overhead costs of travel, parking, and concessions, but has a different set of risks associated with it caused by an unexpected failure in your day to day operation.
What if your Wi-Fi keeps cutting in and out and you can’t get a bet placed or watch the post parade to view the horses before you bet? What if a misplaced tractor trailer wipes out the power to the neighborhood when it takes out two utility poles making a bad left turn?
What if your process has a flaw? Maybe you want your default win bet to be $20 on your legal online wagering account, but you by accident hit $200 and don’t notice until it is too late.
Whether it is a people or process problem, there is always the risk of something you can or can’t control causing a failure within your plan.
4) Financial Risk
While most types of risk affect your bottom line, financial risk refers to your cash flow into and out of the pari-mutuel pools. For example, if you make most of your bets through one specific sportsbook that gives you a reward and they suddenly stop giving you 3% back, that is a financial risk. You have counted on making that reward as part of your bankroll.
If you are a handicapper that makes all their money on the turf races of a specific meet, you can suffer financial risk when it rains for weeks on end and every race is taken off the grass. Often scratches decimate field sizes when races come off the grass or the main track races are contested under poor conditions. This could put a big dent into your usual cash flow.
5) Reputational Risk
Your reputation is everything. It is what defines you. It is what helps to get you that promotion at work or that loan at the bank. It helps, or hurts, your ability to find new customers or investors.
I used to syndicate bets on large guaranteed pools for Pick 4 and Pick 6 wagers in the early 2000s. I had my usual crew of guys and we had some success over the years until life got too busy to continue the syndicate regularly. Some of the guys also played with another guy who syndicated larger bets as well. At least they did until they learned that he often would tell them what they were going to play, but wouldn’t always place the entire wager or the size of the wager he collected money for. Suddenly there was an increase in investors looking to buy into my syndicate. This other guy, Syndicate Sam, never recouped the amount of action or investors that he previously had.
Word spreads quickly on the internet and among small circles like handicappers. He had his name tarnished in online message boards and on social media. Remember to be true to your word. Without your reputation, you have nothing left.
By being able to identify the different risks that you face as a handicapper you can work to mitigate and avoid them while focusing on maximizing your bankroll.