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Types of e-business Risks

Last Updated : 06 Apr, 2023
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What is e-business Risk?

Unlike arm’s length transactions in physical exchange, online transactions are subject to a number of risks. The probability of any mishap resulting in financial, reputational, or psychological losses to the parties involved in a transaction is referred to as risk. Because of the greater probability of such risks in online transactions, security and safety issues have emerged as the most immediate concern in e-business.

These issues can be broadly classified into three categories: Transaction Risks, Data storage and Transmission Risks, and Intellectual property and Privacy Risks.

Types of e-business Risks

1. Transaction risks: 

Online transactions are subject to the following transaction risks :

  • The seller denies that the order was ever placed by the customer, or the customer denies that he ever placed the order. This is known as ‘default on order taking/giving.’
  • The intended delivery does not occur, goods are delivered to the incorrect address, or goods other than those ordered are delivered. This could be considered a ‘default on delivery.’
  • The seller does not receive payment for the goods supplied, despite the customer’s claim that payment was made. This is known as a “default on payment .”

Thus, in e-business, the risk may arise for either the seller or the buyer as a result of default in order taking/giving, delivery, and payment. Such situations can be avoided by mandating identity and location/address verification during registration, as well as obtaining authorization for order confirmation and payment realisation.

For example, In order to confirm that the customer entered his information correctly in the registration form, the seller may check the ‘cookies’. Cookies are similar to caller ids in phones, which provide telemarketers with information, such as the consumer’s name, address, and previous purchase payment record. In order to protect customers from anonymous sellers, it is always best to shop at well-known shopping sites.

In terms of payments, we’ve already seen that credit cards are used in nearly 95% of cases for online purchases. When confirming the order online, the buyer is required to provide information such as the card number, card issuer, and card validity. These details may be processed offline, and the seller may proceed with the delivery of goods only after assuring himself or herself about the availability of credit limits, etc.

2. Data storage and transmission risks:

Indeed, knowledge confers power. But consider what happens if power falls into the wrong hands. Data stored in systems and in transit is exposed to a wide range of threats. Vital information may be stolen or altered for selfish reasons or simply for fun/adventure.

You’ve probably heard the terms ‘virus’ and ‘hacking. ‘Do you know what the full form of the acronym ‘VIRUS’ stands for?

It stands for Vital Information Under Siege. A virus is a programme (a set of commands) that replicates itself on other computers. Computer viruses can cause annoyance in the form of some on-screen display (Level-1 virus), disruption of functioning (Level-2 virus), damage to target data files (Level-3 virus), or complete system destruction (Level-4 virus). Data can be intercepted during transmission. Cryptography can be used for this. It refers to the art of safeguarding information by converting it (encrypting it) into an unreadable format known as ‘cyphertext.’ Only those with a secret key are able to decipher (or decrypt) the message into ‘plaintext.’ This is analogous to using ‘code words’ with someone so that others do not understand what you are saying.

Antivirus software (such as Norton, AVG, and others) should be installed. To protect data files, folders, and systems from virus attacks, all files and discs should be thoroughly scanned with such programmes. Encryption is the process of converting data into code that cannot be read by unauthorised users. Because the sender converts the data into code and the receiver knows the rules for encoding and decoding, no one else can read the message.

3. Risks of threat to intellectual property and privacy:

The internet is a public domain. Once information is available on the internet, it is no longer in the private domain. It is then difficult to protect it from being imitated Data provided during online transactions may be provided to others, who may begin dumping a variety of advertising and spam, and promotional materials into your inbox.

Hackers may represent as customers themselves. They may use stolen credit cards for legitimate customers. A fraudulent business may operate a bogus website, collect advance payments from customers, and then fail to deliver the product.

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