How can you manage risks in e-commerce?

E-commerce is a booming industry that offers many opportunities for businesses and consumers alike. However, it also comes with various risks that need to be managed effectively to ensure success and avoid losses. In this article, you will learn how to identify, assess, and mitigate some of the common risks in e-commerce, such as security breaches, fraud, legal issues, customer satisfaction, and competition.

1 Security risks

One of the biggest risks in e-commerce is the security of your website, data, and transactions. Hackers, malware, phishing, and denial-of-service attacks can compromise your online store, expose sensitive information, and disrupt your operations. To prevent and respond to security risks, you need to implement robust measures such as encryption, firewalls, authentication, backup, and recovery. You also need to comply with relevant standards and regulations, such as the Payment Card Industry Data Security Standard (PCI DSS), and educate your staff and customers on how to protect themselves online.

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Nadia S.

Consultant
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Interesting points and very brief. I would also consider motivation and purpose in your leadership to avoid insider threat. A disgruntled employee can give out so much more easily by seeing an incentive than one trying to get in from the outside.

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Christopher Eberle, D.M.

Head of Risk for Regulated Entities- Americas @ Amazon | Risk management, compliance
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One thing I found helpful is to not simply comply with the PCI DSS standards, but implement them routinely into the education process to reinforce the need that governance, risk, and compliance is everyone's responsibility and not just the risk and compliance teams. Integrate the compliance requirements into policies and procedures above and beyond those intended to meet compliance standards.

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2 Fraud risks

Another major risk in e-commerce is fraud, which can result from identity theft, chargebacks, false claims, or counterfeit products. Fraud can cause financial losses, damage your reputation, and erode your customer trust. To reduce and manage fraud risks, you need to use secure payment methods, verify your customers' identity and address, monitor your transactions and inventory, and enforce clear policies and terms of service. You also need to cooperate with law enforcement and other stakeholders to report and resolve fraud cases.

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Christopher Eberle, D.M.

Head of Risk for Regulated Entities- Americas @ Amazon | Risk management, compliance
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From my prior law enforcement experience, the more proactive a company is in reporting fraud events, the more likely investigators can identify the culprits. Trails to track criminals grow cold quickly so the faster law enforcement is informed, the more success is likely.

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3 Legal risks

E-commerce also involves various legal risks, such as copyright infringement, trademark violation, privacy breach, tax evasion, or consumer protection issues. Legal risks can expose you to lawsuits, fines, penalties, or injunctions that can harm your business and brand. To avoid and handle legal risks, you need to follow the laws and regulations of the countries and regions where you operate, register your domain name and trademarks, obtain necessary licenses and permits, respect intellectual property rights, and disclose your privacy policy and cookie policy. You also need to consult with legal experts and insurance providers to ensure compliance and coverage.

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4 Customer risks

Customer satisfaction is crucial for e-commerce success, as it affects your retention, loyalty, and referrals. However, customer risks can arise from poor quality, delivery delays, technical glitches, or negative feedback. Customer risks can reduce your sales, increase your costs, and damage your reputation. To improve and maintain customer satisfaction, you need to offer high-quality products and services, provide fast and reliable shipping and delivery, ensure smooth and user-friendly website functionality, and solicit and respond to customer reviews and complaints. You also need to communicate clearly and frequently with your customers and offer them incentives and rewards.

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Christopher Eberle, D.M.

Head of Risk for Regulated Entities- Americas @ Amazon | Risk management, compliance
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In my experience, customer risk is one of the meta risk in risk management as it ties to so many other risk to include legal, reputations, and even regulatory risk (written complaints to a regulator). Even though many risk departments are not customer facing, always keep the customer front of mind.

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5 Competition risks

E-commerce is a highly competitive industry, where new entrants, substitutes, and rivals can threaten your market share, profitability, and growth. Competition risks can result from lower prices, better features, wider selection, or stronger marketing. Competition risks can force you to lower your margins, invest more in innovation and differentiation, or lose your customers and prospects. To cope and compete with competition risks, you need to conduct regular market research and analysis, identify your target audience and value proposition, monitor your competitors' strategies and performance, and leverage your unique selling points and competitive advantages.

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6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?

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Nadia S.

Consultant
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Rather than this bespoke headline, I would have utilised the PESTLE acronym as it just groups things together more neatly. The main thing about Ecommerce is the cyber threat in most of the areas.

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How can you manage risks in e-commerce?

1

2

3

4

5

6

1 Security risks

2 Fraud risks

3 Legal risks

4 Customer risks

5 Competition risks

6 Here’s what else to consider

Risk Management

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How can you manage risks in e-commerce?

1

2

3

4

5

6

1 Security risks

2 Fraud risks

3 Legal risks

4 Customer risks

5 Competition risks

6 Here’s what else to consider

Risk Management

Rate this article

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