The Modern Olympic Games: Governance and Ownership of Risk

The modern summer Olympic Games are large and complex enough in scale to be termed 'mega events'. They use tremendous aggregate resources (human, physical and financial as well as intangibles such as volunteering and the brand of the host city and nation) for their timely execution. The effects of such investments are long-lived and significant even for host countries with strong national economies.[1] It is therefore imperative to consider the Games' real value and to identify the challenges facing organisers by gathering evidence on their governance structures, as well as the processes evidenced in host environments.

Mega projects and events have attracted much scientific interest from researchers who have sought to position them in the broader context of urban planning and city development.[2] In this context, Aristotle's ideas on the relative virtues of episteme (science), techne (art), and phronesis (practical wisdom) to illuminate planning research and analyses have been revisited. Flyvbjerg argues that the principal objective for planning research with a phronetic approach is to clarify values, interests and power relations in planning as a basis for praxis (the practical application of theory);[3] posing questions such as: 'where is the project leading? Who gains and who loses, and by which mechanisms of power? Are related developments desirable?' When such considerations are taken into account, lawmakers and governments begin to see that national fiscal distress is too high a price to pay for such large-scale events and that reform is needed. The key case study here is the 2004 Athens Games' €5.10 billion spending spree, which significantly damaged Greece's financial position, which in itself is linked to the riots and episodes of civil unrest of December 2008.[4]

Assessing the Financial Burden

While the modern summer Olympic Games Organising Committees (OCOGs) have been making a modest profit, the infrastructure works carried out by recent host cities and countries approach tens of billions of pounds. The Athens OCOG had a €7 million profit whilst €5.10 billion was spent on related infrastructure for the Games. Infrastructure costs related to the Beijing Games are estimated to be $20 billion; the Beijing OCOG made a $170 million profit.[5] Arguably, time and honour pressures lead to the prioritisation of certain projects at the expense of others. In the UK context, the East Thames Gateway plans as well as the Heathrow Terminal 5 and Stratford International rail terminal works have been on the cards for years but the urgency created by the opening date of the Olympic Games meant that the relative importance of these projects was heightened, despite the existence of long-standing demands by other sectors.

Impact assessment research has so far highlighted the multifaceted nature of impacts related to the Games (political, economic, social, cultural, environmental and technological); their geographical spread (local, regional, national and international); and their temporal variation (bid stage, planning stage and event time stage). Importantly, ex ante impact studies have traditionally been used to rally support for bids using ambitious forecasts whilst ex post studies have been less comprehensive and inadequately funded.

Ownership and Governance

The relationship between ownership, governance and delivery of the modern Olympic Games is complex, but needs to be fully understood in order to understand who owns the risks associated with putting them on. The modern Games belong to the International Olympic Committee (IOC) but the overall event is delivered predominantly by others, namely the host city/nation that undertakes to deliver all the infrastructure and development services; and the international federations representing the summer and winter events in the Games' programme. Notwithstanding the fundamental role played by the public sector in the host country, the private sector is also involved in delivery via sponsorship, other value in-kind, and/or contracted services. Finally, tens of thousands of volunteers contribute to the running of the event in a number of roles and the staging of the Games would arguably be prohibitively expensive without their unpaid labour. It is estimated that London will need 70,000 volunteers for the 2012 Olympic and Paralympic Games.

To understand the event's governance, the legal status of related organisations and the parameters of the contracts signed need to be considered. The IOC holds the monopoly over the Olympic brand, the sales of the rings emblem, and associated terms such as Olympic and Olympic Games. As the registered owners of the Games, no other organisation can organise Olympic Games of any size or scope unless they have permission from the IOC. Significantly, the IOC owns the signal of the Olympic media coverage and sells it to broadcasters for vast amounts of money. Any sponsors wanting to associate with the Olympic brand then come under the monopoly of the IOC, having to buy such association from the IOC (as is the case for the global top sponsors) or the IOC's local representative, the OCOG (as is the case for national sponsors). National Olympic Committees (NOCs - the UK's NOC is the British Olympic Association) similarly cannot represent their respective country unless they are recognised by the IOC. If they were to be established without permission, international copyright legislation would apply and they would be in breach for using the term Olympic in their name. In the build-up to the Beijing 2008 Games, the IOC exercised such power by banning the Iraqi NOC because 'it was not free from political influence'.[6]

In essence, the IOC holds a monopoly over the event: the Games' hosting arrangements are hence a franchise temporarily granted to the host city. The NOCs are representative branches of the IOC's chain of command that ensures that national athletes compete at the Games and the interests of the IOC are protected around the world. Increased competition from bidding cities and the expectations of the International Sport Federations (IFs) have also created the phenomenon of 'Games inflation' whereby each host is under pressure to outperform the previous one in quality and quantity of preparations for the event. Costs associated with the London bid are estimated to have been in the region of $25.5 million.[7] The infrastructure budget for London suggested that a funding package for specific Olympic costs from the UK government and the Mayor of London totalling $3.8 billion would be available.[8] Subsequent announcements, however, suggest that this estimate was incorrect and have calculated the cost to be in the region of £12 billion.[9] Post 9/11 the security budgets had to increase dramatically and in the case of Athens, final estimates for security alone are in the region of €1 billion.[10]

In accepting to host the Games, the NOC, the OCOG and the host city are jointly liable for all commitments entered into individually or collectively concerning the organisation and staging of the event. The IOC, on the other hand, has no financial responsibility whatsoever.[11]

Ultimate planning authority for the OGs is with the specially formed Olympic Delivery Authority (ODA) and the Cabinet-level minister responsible for delivering the Games. The ODA reports to the UK Olympic Board, which comprises the Olympic Minister (Rt Hon Tessa Jowell MP, working out of the Cabinet Office in the UK), the Mayor of the host city and the chairmen of the NOC and local OCOG. The ODA ensures delivery of the physical infrastructure for the Games, including the construction of the new venues. To help do this, it is granted special powers to purchase land, compulsorily if necessary, and to grant detailed planning permissions in the Olympic Park, where the main venues are clustered. The ODA also ensures effective co-ordination of central and local government in the preparation and staging of the Games and is granted special planning powers to enable it to operate.

Modern Challenges

The modern Games present five significant challenges to organisers. Some are due to the structure of the organisations involved, while others, including globalisation, gigantism, nationalism and commercialism, stem from the global context of the Games' operation.

Firstly, games inflation and the kudos associated with successful hosting of the Games mean that future hosts cannot afford to downscale the event and risk losing face in front of global audiences. It is a terrible embarrassment for the host city to fall behind with preparations and risk losing the rights to host the games to other competing cities (the Athens OGs organisers were given a warning 'yellow card' four years before the games by the then-IOC President, Juan Antonio Samaranch, because of unacceptable delays to infrastructure works such as venue development. The South African organisers of the 2010 World Cup have suffered similar accusations; the Delhi Commonwealth Games organisers are working hard to convince the owner/franchisor of that event that they will be ready in time; delays in the redevelopment of Wembley stadium led to the failure of the UK's bid to host the 2006 Football World Cup). In the case of the sporting and supportive infrastructure of the 2000 Sydney Olympics, the budget was mostly covered by the government of New South Wales, which in addition provided several economic bailouts totalling some AUS$140 million to the OCOG to cover operating costs.

Secondly, in order to meet expectations about both the host city and national teams' performance, a clear trend towards strong government funding and administrative control - and away from decentralisation to the private and voluntary sectors - emerges. As regards policies for sport development in particular, a study of the 2008 Beijing Games preparations by Wang (2008), reveals that although existing elite sport governance was becoming more privatised and decentralised after the successful bid, recentralisation occurred in pursuit more medals in the 2008 Games as per the Chinese central government requirements.[12]

Thirdly, impact assessments of the OGs have been window dressing in the past. Urban regimes in the form of political groups and individuals use ex ante impact studies that overestimate the economic benefit to the host city to rally support and influence public opinion. Impact reports for the recent Athens 2004 Games have been identified as image-building exercises: institutional and contractual obligations of the bid committee and the Athens OCOG to protect and enhance the Olympic brand affected the conceptualisation and communication of impact data and reports at different points in time.[13] The IOC recently introduced attempts to capture the impact of the Olympic Games in a systematic way through the Olympic Games Global Impacts programme. These are steps at the right direction but, as the evaluations are performed by the OCOG - an IOC franchisee - impartiality cannot be expected.

Fourthly, the sheer scale of the event has attracted considerable criticism from opponents to the Olympic Games who see negative environmental and social impact.[14] OCOGs cannot be immune to such critiques as their activity is very much prescribed in the host city manuals that accompany the host city contract and also as they enter a group of organisations (IOC, IFs, NOCs, global sponsors) with long-standing and established partnerships and preferences for suppliers in a global supply chain. As a 2004 Oxfam report highlights, parts of the Olympic supply chain are not socially sustainable and are vulnerable to critique:[15]

This report shows that the business practices of major sportswear companies violate both the spirit and the letter of the Olympic Charter. Yet the Olympics movement, particularly the International Olympics Committee, has been remarkably silent in the face of these contraventions.

'Winners' and 'Losers'

The culmination of these challenges makes hosting the Games a very risky business. Despite the possible revitalisation of the economy from Games-related spending, the prevailing financial climate should give food for thought, particularly in light of the bail-out of Western banks who were 'too big to fail'. Sports events also claim to revitalise the economy at a time when few others can. However usually the trend is towards extra spending to reassure national reputation and credibility, rather than fiscal prudence. With the exception of Beijing, neither the UK, Sydney nor Athens could probably afford to host them, but once involved none could afford to give up on their chosen path.

The jury is still out on whether hosting mega sporting events such as the Olympic Games actually leads to a long term increase in sports participation. As Wang highlights in her study of the sporting impact of the Beijing Games, without appropriate methodologies it is erroneous to suggest that the documented increase in sports participation is actually the result of the visibility and promotion created by the specific event. Global trends towards sports fitness, growth of disposable income and available personal time are important factors that can also explain the increase in participation in China.

The above discussion provides snapshots of some of the main challenges that Games organisers are exposed to in managing this mega sporting event. Researchers seeking to find evidence of a lack of phronesis in planning for this event need to collect substantially more evidence to capture the multi-dimensional nature of the Games' impact. Future analysts will rightly question whether Games planners were planning for games requirements, legacy requirements, host country political requirements or financial gain.

Dr Eleni Theodoraki
Director, Edinburgh Institute for Festival and Event Management
Napier Business School

NOTES
1 M Malfas, E Theodoraki and B Houlihan, 'Impacts of Olympic Games as mega events', Journal of the Institution of Civil Engineers (Vol. 157, 2004), pp. 209-20.
2 P R Emery, 'Bidding to host a major sports event: Strategic investment or complete lottery' in C Gratton and I Henry (eds), Sport in the city: The role of sport in economic and social regeneration (London: Routledge, 2001); C Gratton, S Shibli, and R Coleman, 'Sport and economic regeneration in cities', Urban Studies (Vol. 42, No. 5/6, 2001), p. 985; M J Burbank, G D Andranovich, and C H Heying, Olympic dreams: The impact of mega-events on local politics (London: Lynne Rienner Publishers, 2001).
[3] B Flyvbjerg, 'Phronetic planning research: theoretical and methodological reflections', Planning Theory and Practice (Vol. 5, No. 3, 2004), pp. 283-306.
[4] Eleni Theodoraki, 'Organisational communication on the impacts of the Athens 2004 Olympic Games', Journal of Policy Research in Tourism, Leisure and Event (Vol. 1, No. 2, 2009), pp. 141-55.
[5] China Sports Daily, 'BOCOG reports 1.16 million RMB profit', 24 June 2009.
[6] BBC Online News, 'Iraq banned from Beijing Olympics', 24 July 2008.
[7] Games Bids, '2012 Summer Olympic Games', 2008.
[8] London Bid Committee, 'Volume1-Theme 2 Political and economic climate and structure', London Bid Dossier (London: London Bid Committee, 2005).
[9] Daily Telegraph, 'Olympic-sized overspend on London 2012 pushes cost to at least £12bn', 7 November 2009.
[10] Independent, 'Cost of security for Athens Olympics to exceed £675m', 2 May 2004.
[11] International Olympic Committee, Olympic Charter (International Olympic Committee, 2004).
[12] W Wang, 'Sporting Impacts of the Beijing 2008 Olympic Games', Unpublished Third Year Report of PhD Thesis (Loughborough University, 2008).
[13] E Theodoraki, 'Isomorphism in the Olympic Organisational field: The Case of the Beijing Organising Committee for the Olympic Games', in M Moragas, C Kennett, and N Puig, (eds.) The Legacy of the Olympic Games 1984-2000 (Lausanne: International Olympic Committee, 2003), p. 465-81.
[14] H Lenskyj, The Best Ever Olympics: Social Impacts of Sydney 2000 (Albany, NY: SUNY Press, 2002).
[15] Oxfam GB & International Confederation of Free Trade Unions, 'Play fair at the Olympics: Respect workers' rights in the sportswear industry', 2004.