Business Risks Articles

Ways to Evaluate and Reduce E-commerce Business Risks

Nowadays, e-commerce is rapidly growing in most regions of the world, penetrating into new markets and countries. Although it provides many new opportunities for the entrepreneurs, certain risks should also be considered. There are the risks of a global character as well as internal ones that arise as a result of the company’s activity in Internet.

Global business risks of e-commerce

Risks related to the violation of law

It is believed the Internet is a virtual territory with no laws. In fact, there is a large number of laws regulating Internet activity, which represent the main source of commercial risks for the e-commerce companies. The danger is that virtual companies inadvertently violate laws (due to their abundance and diversity) of the countries in which they trade. Very often, the companies aren’t able to take into account new methods of trading.

Contract risk

As long as the contract does not belong to the category of transactions that must be signed and sealed, there are no legal obstacles to the conclusion of the agreement through the Internet. The main contract risk is an incomplete agreement on the conditions under which virtual companies operate. The contract terms must include a clause on compensation for damages in case of violation of the contract terms. Frequently, this is the most important clause of the contract.

Risk of violating the intellectual property rights

Although it seems obvious, companies often do not pay attention to it. Intellectual property rights are different in various countries. The protection of a brand in a certain country does not mean the same protection in all other jurisdictions.

Risk of providing “innocent” assistance

Providers of Internet services often allow the placement of third-party publications on their websites. It puts the companies at risk. It is not clear to which extent the disseminators of information can display the content of such publications posted on their websites.

Many questions arise about the taxation of e-commerce activity. Taxation should not interfere with e-commerce, as well as create incentives to change the nature and place of sales transactions. Finally, it is especially important for parties that have access to the personal data to be confident in the security of these data. A guarantee of confidentiality must be very strong.

Operational risks of e-commerce companies

Every business that has already taken its niche on the market has operational risks. These include:

  • search engine optimization risks. Website traffic may drop by 90% overnight. This factor cannot be predicted. It’s necessary to adapt and act on time.
  • risk of the website’s physical location. The company may become either profitable or unprofitable depending on which hosting was selected. The page loading speed is one of the most critical factors. In addition, many hosts are not protected against DDOS attacks. That’s why there is a risk for the company to lay idle from several hours to several days.
  • price risks. If an enterprise does not monitor prices, it may encounter the situation when the closest competitors reduce prices and lure all customers. Only a regular control over prices allows withstand a competitive struggle.

It’s impossible to measure or assess operational risk quantitatively. In order to understand the real situation, it is necessary to perform a constant monitoring. This is the only approach that makes it possible to detect the existence of the problem and assess its importance for the proper functioning of the website.

How to plan the reduction of operational risks?

If a company receives organic traffic, it is very important to keep the website clean and not get affected by various filters that prevent the website from getting the maximum returns.

If the company was negatively affected by the implementation of the algorithm, it should quickly start monetizing the visitors. The time spent on the client support work should also be dedicated to fixing the issues.