What was the first thing that stuck out in your mind when you look back at the London 2012 Olympic closing ceremony? If your answer was how they were able to seamlessly integrate years of British pop, rock and everything in between, then you’re not alone. If the $14.46 billion price tag attached to the event was your first thought, then you could probably have a successful career in the financial industry. According to Wikipedia 2012 Summer Olympics financing data, “the original budget for the Games was £2.4 billion, but this was increased almost fourfold to about £9.3 billion ($14.46 billion) in 2007.” Was this budget a success?
Let’s look at some basic questions financial analysts and managers might look at to align the company’s budget with its success.
1) Assumed benchmarks: What are the success indicators?
While an athlete might use medal placement as a success indicator, financial professionals use budgets to help benchmark internal success when determining the right relationship between costs to benefits. The more a company can save, the more money can be given back to the employees, strategic initiatives, shareholders, and the community stakeholders. Looking into the history of the past 17 Olympics in CNBC’s Olympic Cities: Boom and Busts, financing Olympic success has typically revolved around the ability to increase sports initiatives, develop a strong brand name reputation, and ultimately builds infrastructure which enhances future business income without leaving behind bad debts for years to come.
2) Historical figures: What indicator marker(s) stand out in comparison?
Historically there have been several Olympic budget ups and downs over the years; however, the first city to truly meet budget and turned around the way the Olympics were financially run can be accredited to Los Angeles (Summer 1984). According to this CNBC boom, “Los Angeles can be credited with changing the way the modern games were run and became the first Olympics since 1932 to make money. The wider economic impact of the Games on Southern California has been put at $3.3 billion.” The 1984 games also made a big step towards future sports in United States by sharing 40% of the $222.7 million of profits with youth sport development programs.
3) Productivity: Where is it going?
While athletes can gain fame and fortune from Olympic success and world recognition, cities can also help change their image through the right investment of resources. The city with the top performing ability to change inputs into substantial image boosting outputs is Barcelona, Spain (Summer, 1992). Today, Barcelona is known as the how to model for modernizing a city through the Olympics. According to this CNBC boom, “ The games transformed the city’s image as a center for commerce; in one annual report Barcelona shot from 11th to fourth of the best European cities to do business in.”
4) Cost: How did we perform against budget?
While it is important to know the cost breakdown of employees or raw material in the office, it is also vital to maintain a budget that was agreed upon. The city that was unable to maintain costs and performed as one of the worst financially budgeted cities over the past 17 Olympics was Athens, Greece (Summer, 2004). According to this CNBC bust, “Although Athens put on successful games, they went badly over their $4.6 billion budget and many believe that the debt accrued, $14-15 billion according to Stephen Wenn, Professor of Sport History and Olympic studies at Wilfrid Laurier University, contributed to the country’s financial crisis.”
So how do you think London will fair with the rest, will it be a financial budgeting success or failure? Do you have any experiences with successful or unsuccessful budget tips or tricks you would like to share?
Further Reading: Did 2004 Olympics Spark Greek Financial Crisis is an article that digs even deeper into the issue of Greece’s budget realities associated with the Olympics.
By Andrew Pyzik, Wall Street Services Reporter
Andrew Pyzik is a business management professional who has worked with startup project ventures to top Fortune 500 leaders on an international stage. Currently teaching Finance and Managerial Accounting in New York, Andrew is the newest Wall Street Service’s reporter on industry news and must have finance skills for today’s top professionals.