E-COMMERCE:

RISK & CHALLENGES

PRESENTED BY
ARSHIT MAHAJAN (15-MBA-15)
A N K I TA M A H A J A N ( 0 9 - M B A - 1 5 )

INTRODUCTION: E- COMMERCE
Electronic Commerce (E-Commerce) is where business transactions ensue
through telecommunications networks, particularly with the help of
Internet.
E- Commerce has been the emerging business strategy in the era of globalization.
E-commerce is anything that involves an online transaction.
E-commerce can be broken down into two parts:
1. E-merchandise: selling goods and services electronically and moving items
through distribution channels, for example through Internet shopping for groceries,
tickets, music, clothes, hardware, travel, books, flowers or gifts.
2. E-finance: banking, debit cards, smart cards, banking machines, telephone and
Internet banking, insurance, financial services and mortgages on-line (Elizabeth
Goldsmith and others,2000).

BENEFITS OF E-COMMERCE
No barriers of time and distance.
The cheapest means of doing business.
Direct cost-of-sale for an order taken from a web site is lower.
Strategic benefit of making a business 'ecommerce enabled', is that it helps reduce
the delivery time, labour cost and the cost incurred in the document preparation,
supervision, credit card machines, overtime.

OBJECTIVE
Large amount of e-commerce activities, increased usage of internet, and ever
changing technologies means new threats and risks and vulnerabilities for businesses
as more and more business functions and procedures are becoming paperless.
For this purpose, right controls are required within an organization to reduce the risks
and ensure effective functioning of the information systems.
The objective of our work is to identify the risk and challenges involved in ecommerce and to suggest few measures for risk minimization.

RISKS IN E-COMMERCE
A threat can be any possible unwanted occurrence or event that could harm the
business.
The exposure is the possible loss of money that would occur as a result of the threat
becoming a reality.
The Risk is the chance that the threat will become reality.
We have categorized risks in three primary areas:
1. Information risks,
2. Technology risks, and
3. Business risks

INFORMATION RISKS
Information Risks stem from information published and contained in web sites
and associated with the conduct of e-commerce. Following are some of the
information risks:
1. Infringement and invasion of privacy.
2. Unauthorized access to a web site.
3. Electronic bulletin boards containing defamatory statements resulting in liability or
embarrassment .
4. Credit card information intercepted in transit is disclosed or used for fraudulent
purposes .
5.

Information that has been changed or inserted in transmission is processed leading

to erroneous results.

TECHNOLOGY RISKS
Technology risks include risks involving hardware, software, telecommunications and
databases. These risks include the consequences resulting from the misuse of technology
or the use of inappropriate technologies required to address business needs. Following are
some of the technology risks:
1.

Negligent errors or omissions in software design .

2.

Infecting a web site with computer viruses .

3.

Internet service provider (ISP) server crashes .

4. Software error and omission risks causing unauthorized access .

5.

Third party intercepts credit card information in transit causing breeches in security for online
payments.

6.

Insufficient bandwidth to handle traffic .

7.

Risk of improperly integrating e-commerce system with internal databases .

8.

Risk due to poor web site design manifesting themselves in long response times.

BUSINESS RISKS
Business risks concern customer and supplier relationships, and risks
associated with products and services marketed and distributed over the
Internet. They also include risks associated with managerial aspects of the
business including personnel and contractual relations. Following are some of
the business risks:
1. Using web sites to conduct illegal promotional games, such as a sweepstakes or
contests.
2.

Lack of maintenance on existing web pages.

3.

Impact on business due to intellectual property lost due to employees moving to

competitors.

4.

Changes in supplier relationships re: data access, data ownership, distribution

strategy, and marketing tactics .

5. Products out-of-stock due to poor communication with operations .

CHALLENGES IN E-COMMERCE
Following are a list of certain Challenges that are faced while dealing with ecommerce :
1. Implementing a content marketing strategy.
2. Building trust through your website.
3. Using big data to gain insights on customers.
4. Integrating mobile into your website.
5. Defining your sites privacy setting.
6. Integrating and forming a multichannel shopping platform.

MINIMIZING THE RISKS

There are three steps to ensuring customers enjoy a secure online experience:
1. Encryption involves converting or scrambling information to make it unintelligible to everyone
except the intended recipient.
2. Authentication means a trusted authority can prove that the business is who they say they
are.
3. Digital certificates are electronic files that identify individuals and websites and facilitate safe
and secure, confidential communications. They act as a digital passport.
Fully authenticated Secure Sockets Layer (SSL) digital certificates help to establish trust between
parties involved in online transactions over digital networks by fulfilling two main purposes:
1. Securely communicating information so that it cannot be intercepted in transit (confidentiality) or
altered without detection (integrity)
2. Verifying that they are actually doing business with a legitimate business (authentication)

Online retailers should consider implementing these best practices:

Deploy a combination of end-to-end encryption and tokenization to
simplify PCI compliance and protect customers payment card data from
being stolen and used fraudulently.
Make sure all employees understand the risks of card-not-present
transactions. Compensate for the lack of in-store controls with real-time
screening using both payment information and anti-fraud intelligence from
other sources.
Enable proactive security measures. Dont accept fraud as just
another cost of doing business. Every e-Commerce merchant can wield
the power to detect and stop most attempts to make fraudulent online
purchases. Configuring the right kind of fraud logic in the early stages of
your business can help you avoid problems later.

Additionally, for support and guidance on the nuances of fraud management,

e-Commerce merchants should talk to their payments processor :
Ask how to use both payment and non-payment information to detect
fraud and gain visibility into shopper behaviour.
Get recommendations on how to define rules that effectively assess
order risk and determine the appropriate resolution of each order.
Find out what level of support to expect in implementing industry best
practices for reporting, scoring, order resolution and scoring parameters.
Find out if the payment processors solution has a user-friendly workflow
for resolving transactions and managing chargebacks and reversals

THANK YOU !