With the Commonwealth Games set to commence in October, Delhi will provide another interesting case of risk versus reward for cities hosting major events.The rewards for these cities can be significant, both in the short and long term. However the potential for gain carries the risk of economic loss and financial burden for the host city or country for many years following the event. It is only through careful planning, a strong focus on legacy and sound risk management that the likelihood of success will be greater. The 1976 Olympic Games in Montreal demonstrated that reward is no guarantee; the city struggled for decades to pay off the debt it incurred, and the financial burden dragged the city's economy into serious decline in the years following the Games.

Benefits to Host Cities

However with thorough planning, the rewards to a host city can be substantial, both in terms of economic stimulus in the short term, and a lasting legacy in over time, as was proven from the 1984 Los Angeles Olympic Games; (the first Olympics to generate a profit, which was coincidentally, fully funded through the private sector).South Africa, host of the 2010 FIFA World Cup, is the first developing nation to stage a truly global mega-event. It is an opportunity to demonstrate the country's ability to collaborate between private and public sectors, and to achieve a goal amidst a backdrop of political and racial tension.

Some host cities will attempt to create legacies that last years beyond the event. London, for example, is using the 2012 Olympic Games as a way of transforming an underdeveloped part of the city; transport across London will be improved, long term jobs will be created and new residences will be built - all of these will benefit the community well after the Games have completed.

Without a thoughtful activation plan, there are countless risks to the potential successes.

Risks for Host Cities

Without a thoughtful activation plan, there are countless risks to the potential successes.

The 2009 Indian Premier League (IPL) cricket competition was scheduled at the same time as India's general elections. As a result, the Indian Government could not provide additional security from the paramilitary forces. Concerns grew about the threat of a terrorist attack, and with only a month before the tournament commenced, it was announced that South Africa would host the event instead.

This example demonstrates the balance between managing security and political risks, which takes into account the potential for security incidents against public safety and reputational impacts should they occur. Regardless of concerns that the Board of Control for Cricket in India may have had regarding the threat of terrorism during the tournament, the reluctance of some players to attend the tournament, as well as fans to attend matches, meant that the perceived risk was high and that the economic and reputational impact was to be so great that, the BCCI had little choice but to move the event to South Africa.

The potential damage in this case not only impacts the IPL organisers and the tournament moving forward, but also on the country's reputation for holding such events in the future.

The impact of this threat is currently being experienced by the Australian Commonwealth Games team who are struggling to raise enough money through private sponsorship because some sponsors are not convinced the Delhi Games will go ahead.

While any host country or city's objectives for hosting major events are usually aimed at gaining international status and economic benefit, history shows that the larger the event, the larger the potential liability. It is vital to use prudent risk management to protect the investment of all stakeholders and balance the risk against the reward.