- Sponsorship risk doesn’t start at activation, it starts at signature
- AFA and FC Barcelona show why reputation can outweigh revenue
- Strong due diligence is a strategic, not only legal, decision
Terminating a sponsorship earlier is painful and expensive.
Money, effort and trust are invested in partnerships, but sometimes staying until the end can be too costly or too risky.
There are many reasons for early terminations, but reputational risk and financial difficulties are the most common.
Checking the property’s background and speaking to existing sponsors can help reduce those risks, but not eliminate them.
In this FIFA World Cup Year, AFA’s sponsor Socios has publicly announced that payments will be stopped and called for the resignation of AFA’s president.
Since 2021, the blockchain platform has paid over USD 9 million to AFA, but investigations suggest that less than USD 500k reached AFA, with the rest going to intermediaries.
Socios CEO called on other AFA sponsors, including Adidas, American Express and Coca-Cola, to follow suit.
Rightsholders can easily find themselves in similar situations.
Last week, FC Barcelona terminated a partnership with the crypto firm Zero-Knowledge Proof (ZKP), only two months after the three-year deal was announced.
The reason?
Reputational risk after finding out that Andrew Tate, a former kickboxer who faces several criminal charges, owned ZKP.
As marketing and sponsorship executives, we can’t control our partners’ actions, but we can:
✓ Anticipate risks and discuss what could go wrong during negotiations
✓ Do in-depth background, legal and compliance checks
✓ Require ethics, accountability, compliance, and terminating clauses
✓ Speak to existing partners about their relationship and potential disputes
✓ Request a big part of the fee payment to be made at the signature
“It takes 20 years to build a reputation and five minutes to ruin it”, as Warren Buffett alerted.
Better to play it safe than be sorry.
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