MGM Resorts International MGM Business Risk Report

I. Market Risks

A. Economic downturn impacting travel and leisure spending: MGM Resorts International, being a major player in the hospitality and entertainment industry, faces substantial risk from economic downturns. These downturns can lead to reduced disposable income among consumers, directly impacting travel and leisure spending and thus affecting the company’s revenue.

B. Fluctuations in consumer confidence affecting discretionary spending: Consumer confidence is a crucial determinant of spending in sectors such as entertainment and tourism. A decrease in consumer confidence can lead to reduced spending on non-essential services like those offered by MGM Resorts, impacting overall profitability.

C. Competition from other entertainment and hospitality companies: MGM Resorts operates in a highly competitive environment, competing with both traditional hotel and casino properties and newer online entertainment services. Staying ahead of competitors in terms of service quality, innovation, and price is key to maintaining market share.

II. Regulatory Risks

A. Changes in gaming laws and regulations: As a casino operator, MGM Resorts must adhere to stringent gaming laws and regulations, which can vary greatly by jurisdiction. Changes in these regulations can affect how the company operates and may impose additional costs.

B. Legal challenges related to data privacy and security: MGM Resorts collects a significant amount of personal data from its customers, making it subject to laws governing data protection and privacy. Non-compliance or breaches can lead to legal consequences and damage the company’s reputation.

III. Operational Risks

A. Disruption in supply chain impacting operations: MGM Resorts relies on a global supply chain to provide everything from food and beverages to hotel furniture. Disruptions in this supply chain, whether due to political unrest, natural disasters, or pandemics, could impact operational capacity and customer satisfaction.

B. Cybersecurity threats leading to data breaches: Given the extensive amount of data handled by MGM Resorts, the company is constantly at risk of cybersecurity threats. Data breaches can lead to significant financial losses and erode customer trust.

IV. Financial Risks

A. Foreign exchange rate fluctuations impacting revenue: MGM Resorts operates in several international markets and hence is exposed to foreign exchange rate fluctuations. Volatility in these rates can lead to unpredictable revenues and profit margins.

B. Debt refinancing risks due to interest rate changes: MGM Resorts’ ability to refinance its debt can be affected by changing interest rates. Rising rates increase borrowing costs and can impact the company’s financial health.

V. Strategic Risks

A. Failure to expand into new markets successfully: As MGM Resorts looks to expand, both domestically and internationally, it faces the risk of not successfully adapting to local markets, regulations, and consumer preferences which can result in significant financial losses and stunted growth.

B. Reputational risks due to incidents impacting brand image: Incidents ranging from service failures to non-compliance with regulatory requirements can tarnish MGM Resorts’ brand image. Reputational damage can deter new and repeat customers, thus impacting long-term revenue generation.

Mitigation Strategies:

– Diversification of revenue streams to reduce dependence on a single market helps MGM stabilize its financial position and mitigate economic and competitive risks.

– Proactive monitoring and compliance with regulatory changes ensure that MGM remains in good legal standing and mitigates risks associated with regulatory non-compliance.

– Investment in advanced cybersecurity measures protects against data breaches, maintaining customer trust and safeguarding the company’s data assets.

– Hedging strategies to manage financial risks related to foreign exchange movements and interest rate fluctuations help stabilize the company’s financial outlook.

– Robust crisis management and communication plans equip MGM to handle incidents effectively, thereby mitigating reputational risks and preserving brand integrity.