Risk Management is an inherent part of any business, and it is far more critical in the case of Digital Commerce. There are many risks related to data privacy, safety & security of transactions, compliance, etc. With more & more businesses exploring online channels for growth, it is becoming vital to manage these risks effectively.
In this digital era, core business functions must work together with their IT Departments to properly secure their operations. If the Digital Commerce system is not properly managing the risks, it can stop for a few minutes, which can result in significant revenue losses. As per a report by Gartner, a company with $5 Billion revenue incurs around $99 million opportunity loss per year due to unmanaged risks.
Risks related to digital commerce are mainly segregated into below categories:
- Online Frauds
Online transactions have higher chances to result in fraud than offline ones. That is due to uncertainty about the authenticity of a particular transaction. Sometimes, the web-based merchants cannot physically verify the card’s validity of the card or user’s authorization user. Online fraud can take many shapes, including:
- A stolen card number and CVV are illegally used online.
- An unauthorized card user places an order.
- A verified order is disputed by a customer who wrongly claims that he didn’t receive the delivery.
- The hackers issue themselves a credit through merchant system
- Data Breach
Lawbreakers always look for ways to bypass merchants’ data protection methods and steal the saved cardholder information. They can take sensitive information online or at a physical location:
- Online data breach.
Hackers can steal sensitive account information by capturing transaction data during a broadcast or gaining access to the payment processor’s system.
- Physical data breach
Offenders can physically obtain credit card information by violating a card processor’s physical site and getting vital bank documents unethically.
3. Customer Disputes
Customer disputes are typically the top risk concern for e-commerce merchants and can harm more when they deteriorate into chargebacks. The most common reasons for customer disputes and chargebacks are:
- The product is never received, and the service isn’t provided as expected.
- The delivered product is damaged or dissimilar from its online description
- The transaction is illegal.
- The cardholder is billed before the item is shipped or is charged twice for the same transaction.
- Incorrect transaction amount.
- A recurring transaction is processed even after the product purchase is canceled.
- A refund is not processed at the expected time.
- The card is charged without the user’s approval.
The Risk Management Process
Risk management plays a pivotal role in safeguarding organizations and their abilities to accomplish their business mission, not just its technology assets. It identifies potential risks, analyses risks, and takes precautionary measures to reduce/curb those risks. Risk management in the IT security program is the most crucial factor for a business to survive longer.
Usually, risk management can be divided into the following steps:
- Risk Identification
- Monitor & Review
Digital commerce businesses that carry out a detailed risk analysis create a continuing strategy guide for its future, effectively safeguarding hardware, configuration, data, procurement, and more. Risk management can add value to the business contingency and security plan.
How to Manage Risks for Digital Commerce?
Digital commerce has provided organizations with lots of exposure and access to a bigger audience. But it has also made business owners and customers susceptible to serious security risks.
It would be best if you recognized the risks while doing Digital Commerce business. You can create an internal policy to tackle the potential threats and train your staff to execute them.
Here are some essential methods to manage risks in your digital commerce initiatives:
- Train your staff about the risks
Your team should have a clear understanding of the perils your business may have to face. Everyone in your business structure should know the types of risks associated with online transactions. Set up a procedure to avoid and solve those risks, which your staff must follow.
- Confirm information security
By information we mean, customer database, payment process, buying requests, etc. Hackers can quickly attack the Internet, so you must ensure high safety to avoid any information and identity theft. Always create a reliable and effective process to submit authorization requests online before you start accepting card payments digitally.
- Select the right payment merchant
Choosing the right payment merchant service provider will help you with valuable risk management support. They have a deep understanding of risks related to online frauds and hindrances faced in online transactions. You should also contemplate sufficient user data protection capability while selecting your bank and merchant.
- Use effective online policies
Your online portal must list your shipping, return, refund, and privacy policies on each page. Users should be able to find them quickly without the need to search. It will create convenience and satisfaction for customers to visit your page regularly.
Risk management is a critical practice that helps businesses identify, assess, track, and mitigate the risks present in the digital commerce space. As the businesses grow, they need to ensure stability and managing risks is an integral part of it.
The key aspect to determine how to assess the potential risk of exposure includes the risk analysis of a business. Smaller organizations with less-to-no financial or liability risk would be inclined to not invest in costly methods to ensure their system security.
Always do a complete, concise analysis to determine the steps needed to address risk management requirements.