Types of e-Business Risks

The e-commerce marketplace is rapidly expanding; by 2025 there will be approximately 2.5 billion global online shoppers accounting for 25% to 30%of total retail sales worldwide. Increasing internet penetration, and mobile device usage have been a key driver for this stupendous growth. With such rapid progress, however, comes several types of business risks. e-businesses must fathom these threats of e-commerce and their solutions to fully take advantage of the growth that the internet envisions.

What is e-business risk?

e-commerce transactions are very different from physical exchanges and are subject to a range of unique risks. There is a likelihood of encountering issues that may lead to financial, reputational, or emotional losses in transactional procedures while involved in the digital realm. To avoid such risks, security and safety measures have emerged as the most immediate concern in e-business.

What are the different types of e-business risks?

The different types of e-business risks can be broadly classified into different categories. Each of them has been discussed briefly for a better understanding:

1.Transaction risks:

Online transactions refer to the following transaction risks:

• When the seller disagrees that the order was ever placed by the customer, or the customer contradicts that he ever placed the order, this is known as ‘default on order taking/giving.’
• Intended delivery does not occur, goods are delivered to the incorrect address, or goods other than those ordered are delivered. This could be referred to as a ‘default on delivery.’
• Now the seller does not receive payment for the goods supplied, even if the customer claims that payment was made. This is known as a “default on payment.”

These situations can be avoided by checking location/address verification during registration and authorising order confirmation and payment realisation.

Here are 2 examples in which transaction details are often at risk:

- While accepting cookies, buyers disclose authentic information. The best way to avoid this is by only shopping on renowned websites.

- There is risk involved in e-payments by credit cards. Buyers often share important information on the card which may be used against the buyer for illegal transactions.

2. Data storage and transmission risks:

Properly stored data is a powerful source of knowledge but if it falls into the wrong hands there are many risks during transmissions. Data is stolen or altered with VIRUS which is a program that replicates itself on other computers and is a security threat to e-commerce. Some types of viruses and their functions include:

• Level-1 Virus: Causes annoyance (e.g., on-screen display).
• Level-2 Virus: Disrupts functionality.
• Level-3 Virus: Damages target data files.
• Level-4 Virus: Causes complete system destruction.

 To protect important data, the precaution is to convert it into an unreadable format (ciphertext). The basic ways to manage e-business risk issues are described below :

• Data is encrypted (converted into code) like using code words for confidential communication
• Only those with the secret key can decrypt (convert back to plaintext).
• Like using code words for confidential communication.
• Antivirus Software is recommended to be installed to protect against virus attacks and these need to be updated regularly. (Norton, AVG etc.)

3. Risks to Intellectual Property and Privacy in the Digital Era

If information isonce shared online, it changes out of the private domain and becomes part of the public domain.This move makes it challenging to protect it from being imitated or misused. The information is exposed to spam and unwanted advertising that is shared with third parties and this is a great business risk of e-commerce.

Threats from Cybercriminals can cause severe e-business risks like:

• Hackers may pose as legitimate customers and use stolen credit cards for businesses.
• Some businesses might set up fake websites to collect advance payments from customers and then fail to deliver the purchased products

There are some e-business management strategies to mitigate this risk:

• It is best to be cautious and always verify the legitimacy of websites and transactions
• Only shop and transact on well-known and reputable websites
• Be vigilant about the information you share online and consider using privacy tools and settings

The world of e-business involves knowing and mitigating several risks from transaction disputes to data exposures to threats against intellectual property and privacy. The e-business realm presents umpteen challenges that require caution. By employing strong security measures and protecting personal information, e-businesses and individuals can take precautions to save their interests and improve their online experience. Being informed is s good way to reduce risks and ensure a safe and secure e-business environment.

4. Security Breaches

The e-commerce world is rife with online security breaches and cyberattacks

You cannot take a chance with important data like customer data as any cyber breach can damage your business reputation and expose you to liability. Being vigilant is crucial.

We need to conquer security vulnerabilities on war footing and some pointers have been described here:

• Improve Additional Security Layers: Fortify your website with multiple layers of security to counter various types of threats.
• Implement Suitable Security Tools: Choose the correct security tools to detect and stop unauthorised intrusions.
• Use SSL Certificates: Lock all transactions with SSL certificates to protect sensitive data on your site.
• Select a Secure E-Commerce Platform: Choose an object-oriented programming language platform that is known for better security practices.
• Monitoring updation: Regular monitoring of your website and servers for detecting any suspicious activities ensures a prompt response to any potential threats.

5. Refunds and client disputes

Another common risk for most e-commerce stores is refunds and client disputes. These arise due to wrong product delivery, defective products, or the same customer being charged twice for a single product, etc. A refund for these reasons from customers is within the merchant’s preview but when customers demand a ‘chargeback’ it is a blow to the business provider. Usually banks set a monthly chargeback limit for businesses and no borrowing fees are allowed on exceeding the limits.

To protect against this risk of refunds and client disputes, a few remedial guidance is listed as follows:

• Reimburse Fees for Reversed Transactions: Businesses must pay a fee for each transaction that is reversed for the customer
• Clear Refund and Return Policy: A clear refund and return policy is to be kept in place on your e-commerce sites to protect against Chargeback risks.
• Maintain a dossier of Chargeback Disputes: Recording chargebacks against disputes would help to reduce significant losses for businesses
• Provide Superb Customer Service: Stella customer service reassures customers to contact you directly for order issues, reducing the chances of chargebacks and curtailing your accountability.

6. Low SEO ranking

We all know the consequences of a low SEO Ranking and that’s not good for any business. For this risk, potential customers will not be able to find your business through search engines. How will you do business if you can't sell for the lack of tracking your company?

a) Let us go through these points and aim at refurbishing our SEO rankings to mitigate this e-commerce business risk:

• Knowledge is power: Product demand evaluation, traffic search, and keyword difficulty are crucial to inform strategies
• Measure Market Competitiveness: In a highly competitive market, ranking for some keywords can be challenging
• Invest in SEO Tools and Specialists: Develop an effective strategy for smarty B2B business by investing in SEO tools and marketing professionals
• Strategic Decision Making

b)High-Traffic Keywords: To attract significant traffic, decide on allocating resources for creating content with difficult keywords

c) Long-Tail Keywords: You may also focus on long-tail keywords. This may have fewer searches but face less competition which ranks easily. 

7. DDOS attacks

This risk gets overwhelming when a criminal uses large amounts of web traffic from thousands of host computers to attack the target’s server, meaning a complete crash down of the server and becoming nonfunctional. It is called a DDOS attack or distributed denial of service.

To prevent DDOS attacks, e-commerce business sites need to constantly monitor traffic by filtration or implementing the cloud to increase bandwidth. These risks are common and businesses need to have a prevention plan for DDOS attacks in place as this is a very dangerous e-commerce business risk.

8. Currency exchange risks

The currency for transactions for e-commerce businesses is subject to changes. You may be aware that the currency exchange rates are constantly changing across countries. Now fluctuating changes can pose a threat to your business causing losses.

Here are a few ideas you can look at implementing to mitigate this risk:

• Invoice in One Currency: A great deal of risk can be mitigated by invoicing in one currency, ideally in the local currency
• Customise Modern Payment Platforms: Standardise Payments platform allowing customers to pay in their local currency and convert it to your currency at a minimal fee.
• Reduce Exchange Rate Risks: If you keep all transactions in your local currency, the risk of losing profits due to adverse exchange rates gets reduced.

9. Inadequate authentication methods

In the increasing risks of the digital age of cyberattacks, a username and password are not enough anymore to secure your account. Cybercriminals have become increasingly skillful in unlocking these simple authentication methods by using stolen passwords or resetting passwords.

If you want to mitigate this e-commerce business risk, you can introduce MFA or two-factor verification methods. These require another layer of authentication such as a push notification on a second device before customers log in to your website.

10. Customer expectations

Customer experience is crucial for businesses in the new digitalisation age. Lasting customer relationships and experience is a determining factor for all purchases driving business profits. As of 2024, about 87%of business honchos agree that exemplary customer service directly translates into brand recognition. Around 89% of customers are subject to changing brands resulting from poor customer experience. 86%of consumers are willing to pay more for better customer experience.

Customer expectations are increasing in the B2B space and this is being fuelled by the best-in-class experiences of customers. An example at hand is Amazon.

Listed below are some ideas on how to increase customer expectations:

• Improvise Modern Features: Customer experience includes a series of offerings by businesses like free shipping, spontaneous websites with smooth search functions, personalised product recommendations, order tracking services, and other customer-friendly options. If your website lacks any of these features, then customers are likely to look for alternatives so you are at a risk of losing customers.
• Outdated Website Topics: Always ensure your website is updated and has no old and cluttered look with ads that drive customers away to other alternatives with modern websites.
• Importance of CX Evaluation: Analysing customer experience (CX) will drive more recognition and business prospects to your website and this is a crucial factor
• Impact of Simple Solutions: Attending to tiny details and improvements shall go a long way. As small as reducing the methods to make a purchase or reducing website load time can contribute to the conversions and profitability of websites.

Conclusion

The world of e-business involves knowing and mitigating several risks from transaction disputes to data exposures to threats against intellectual property and privacy. The e-business realm presents umpteen challenges that require caution. By employing strong security measures and protecting personal information, e-businesses and individuals can take precautions to save their interests and improve their online experience. Being informed is s good way to reduce risks and ensure a safe and secure e-business environment.

FAQs

Q1. What is the e-business risk management policy?

Ans. Enterprise Risk Management or "ERM" is the process of identifying, analysing, and managing strategic risks. This helps integrate risk into the strategic planning and resource allocation processes at the strategic level.

Q2. What are the prospects in e-business?

Ans. The eight types of online business opportunities are 

•  e-commerce
•  online courses
•  affiliate marketing
•  online coaching
•  digital products
•  online services
•  influencer marketing
•  dropshipping

Q3. How is business risk created in e-commerce?

Ans. A business risk arises due to uncertainties and this happens when it is not known what is going to happen in the future. Instances of uncertainties that affect a business are changes in government policy, changes in demand, changes in technology, etc.

Q4. What is the difference between e-commerce and e-business?

Ans. E-business and e-commerce can be used interchangeably. Typically, e-commerce refers to conducting online transactions, while e-business encompasses all the business services and activities operated utilising the web.