Andrew Friedman’s Risk Management | The Process Report

Andrew Friedman’s Risk Management

Here’s a trivia question. How many guaranteed multi-year free-agent contracts has Andrew Friedman handed out during his tenure?

The answer is two, of course. Friedman signed Troy Percival to a two-year deal during the 2007-2008 offseason and then Pat Burrell to a two-year deal during the 2008-2009 offseason. Coincidentally, those two signings might be the worst in Friedman’s career when viewed from a results-based perspective.

Friedman works with a tight budget. When it comes to the free-agent market, this can be a bad thing. It means the likelihood of him landing a big-name, big-impact player is slim. But there are pros to avoiding the up-market that play into Friedman’s hands, too. The players Friedman pursues are unable to demand expensive or lengthy contracts. Likewise, these players are typically more open to signing a one-year deal, or betting on themselves by agreeing to a club option. In essence, Friedman is avoiding the high-risk segment of the market.

Look at last winter’s free-agent class:

Jose Molina: one-year, $1.5 million, $1.8 million club option ($0.3 million buyout)
Fernando Rodney: one-year, $1.75 million, $2.5 million club option ($0.25 million buyout)
Luke Scott: one-year $5 million, $6 million club option ($1 million buyout)
Carlos Pena: one-year, $7.25 million
Jeff Keppinger: one-year, $1.53 million

Because the Rays are still taking speculative risks, this is not a failsafe mechanism. Still, by signing players to one-year deals with a club option, the Rays are transferring the risk. The players go along with it for obvious reasons—players are competitive and willing to bet on themselves, especially when it seems like they control the decision with their performance.

Another way Friedman mitigates risk when signing free agents is by targeting non-tendered players with more than a season of arbitration eligibility remaining. Hence why Carlos Pena, Joel Peralta, Lance Cormier, and others signed to a one-year deal stayed with the club beyond their initial contract. If the player performs, the Rays are more than willing to give him a raise for less than market value. If the player falters, the Rays can non-tender him without additional loss.

While Friedman’s free-agent signings are worth large-print headlines, his ability to stack the cards in favor of the Rays netting a good return on investment is important. Bear in mind that he isn’t the only general manager to use these techniques. He’s just the one of the few who has to in order to field a competitive team year in and year out. Lest the Rays encounter another $16 million in sunk costs as they did with Burrell.



Leave a Reply

#layout { padding-left:20px; }