IntroductionElectronic business or e-business is described as doing business activities through the Internet. E-business entails all dealings that one can undertake over a computer network, ranging from online shopping to sending emails (The Free Library par 2). An electronic business owner or manager needs to test out and develop not just the firm’s information technology infrastructure, but also the entire method of how to run their business if the business is to operate effectively (The Free Library par 2).
Many organizations assume that e-business is all about e-commerce which is transacting over the Internet. This assumption can be observed from the many businesses that are increasingly installing technology in their business practices and wanting to take advantage of the benefits and efficiency that e-business facilitates offer (Edgar 2). However, before thinking about the Web design of the business, several issues need to be considered. For instance, will clients want to interact with the organization by electronic means? Do customers have the competency to operate a computer? Do they have Internet access? How will the business handle international orders or inquiries? For all its advantages and returns, e-business is a huge step towards unfamiliar territory and hence, it poses a great risk. It is a decision that needs to be made with careful thought and plenty of preparation (The Free Library par 2). The aim of this paper is to identify the risks associated with e-business.
Two-fold risks of e-business
Managing an e-business poses many challenges. The risks that come with operating an e-business are twofold; 1) there are the overall risks of operating a regular business and 2) the risks that specifically come with operating an e-business (Napier, Rivers and Wagner 366). Ensuring the e-business’ going-concern and protecting its tangible assets are crucial factors to consider and work towards achieving (Napier, Rivers and Wagner 366). Some of the possible threats to e-business include; business disruptions caused by security breaches on the network or website attack by hackers; court cases due to violation of Web-related trademarks and patents; man-made or natural tragedies such as floods, fire, tornadoes, electrical failures, and so forth; legal charges brought against the business because of goods or services transacted on the business Web; lawsuits or indemnities brought on by employees’ inappropriate use of the website or email (Napier, Rivers and Wagner 366).
Risks in E-business
The increase in the amount of money that firms use on e-business is proportionate to the increase in risks linked to the additional operations as a result. The primary risk that firm owners need to take into account is the level at which they want to involve the business activity in e-business (Combe 201). Secondly, decisions have to be made concerning the amount of financing that the business will channel towards technology that is required for the business’s objectives (Combe 202). Thirdly, the prevalent use of the Internet for economic ventures has led to businesses sharing information and ideas (Combe 202). Businesses are no longer stand-alone entities. However, the risks associated with sharing and collaborating with other businesses must be kept in mind (Combe 202). Lastly, participating in e-business inevitably presents technological risks such as security breaches and system failure (Combe 202). Some areas of risk that managers need to concentrate on are functional, mechanical, administrative, legal, and customer-centric (Combe 202). Other risks include;
Data Security Risk
All businesses are confronted with the problem of data security. Electronic business increases this risk. Customers submit a lot of sensitive information to online businesses, for example, bank account numbers, debit card and credit card information, ID numbers, postal address, email address, phone numbers, and so forth to e-business collaborators. It is the responsibility of the Web-site owner to make sure that the information is kept confidential using the right security measures (Dontigney par 3). Failing to protect clients’ private information or the business’ classified information can lead to exposure to competitors, malicious hackers, heavy fines, lawsuits, and a lack of faith from customers.
One of the factors that make venturing into e-business attractive is the relatively small start-up cost (Dontigney par 2). Web hosting and domain names do not require huge amounts of money when compared to purchasing or renting office space or building (Dontigney par 2). But, the expenses incurred in developing a customized website are high, running into thousands of dollars. There is also the time factor. Either the owner may choose to develop it on their own or hire someone to develop it.
Failures in marketing
Good marketing strategies are the core drivers for sales and growth of both regular businesses and electronic businesses. The marketing techniques needed for e-business success are entirely different from regular business marketing strategies (Dontigney par 4). As such, entrepreneurs new to e-business may find it helpful and even profitable to employ the services of a company or individual that is an expert in digital marketing (Dontigney par 4). If e-business does not use effective marketing strategies, it will end up wasting precious financial and time resources.
Even though a business is prudent with costs, uses impenetrable data security techniques, and used best practices in digital marketing, a poor web hosting will ruin an e-business (Dontigney par 5). There is no guarantee that a website will be accessible 24/7. A short supply of bandwidth and a server crash renders websites inaccessible. Poor hosting services result in frequent website crashes (Dontigney par 5). So, if customers find that a website is not available most of the time, they will stop visiting the site.
E-business risk management and control
Business risk for organizations operating in e-business is usually more than a regular business due to increased dependence on technology. E-businesses are more vulnerable because technology tends to change rapidly from time to time (Moscove par 4). E-business risk can be divided into the following categories; User ID and verification; Information technology infrastructure; User confidentiality; Harmful computer programs.
Every type of e-business risk can be solved using control processes that are particularly developed and applied to improve e-business security (Moscove par 1). In spite of a firm’s participation in e-business, a cost-friendly system for controls that can be comfortably maintained and managed is a necessary component of its business strategy. Information system safety controls and e-business are the key challenges that face electronic business development (Moscove par 2). Information controls and software consists of the physical hardware, software, systems, and procedures within an organization’s information system that ensure that accessibility to the business’s resources is restricted to authorized members of the organization (Moscove par 2).
E-business risk can be managed through preliminary risk assessment, which is a formal meeting between system operators and managers and senior management to analyze the major issues facing the business (Miller par 9). This then follows a detailed risk assessment where the project team creates detailed risk situations for every preliminary risk assessment findings. It entails identifying possible controls, ranking the situations concerning risk on a scale for example 1-10, brainstorming meetings and follow-up meetings, and choosing the controls to be used (Miller par 9). After the detailed risk assessment is the controls implementation stage where executive management that took part in the preliminary risk assessment goes through the outcomes and recommendations which aim to minimize risk exposures at low cost, eliminate redundant controls, and reduce the security gaps in situations that are high risk (Miller par 9).
E-business offers numerous benefits such as little capital to start, versatility, and convenience. However, before a business ventures into e-business, it must take into consideration the additional challenges that come with operating a regular business and those that come with running an electronic business. The increasing importance of e-business means that there are increasing corresponding need for controls for the associated risks. The good thing is that there are available methods of controls to mitigate these risks and most of these risks are people oriented. It is the responsibility of management to stay informed of these situations and monitor, evaluate, and take the necessary steps to control them in the rapidly growing e-business environment.
- Combe, Colin. Introduction to e-business. Routledge, 2012. Print.
- Dontigey, Eric. “Risks of E-Business.” Demand Media. Web. 23 Mar. 2016. Viewed from
- “E-Business = E-risk” The Free Library. 1998 Birmingham Post & Mail Ltd 23 Mar. 2016. Viewed from
- Miller, Holmes. “Managing risks in electronic commerce.” Decision Sciences Institute, 1999. Print.
- Moscove, Stephen n.d. E-Business Security and Controls. Web. 23 Mar. 2016. Viewed from
- Napier, H. Albert, Ollie Rivers, and Stuart Wagner. Creating a winning e-business. Cengage Learning, 2005. Print.
- “Small firms bridle at e-business risks” Computer Weekly. Web. 23 Mar. 2016. Viewed from http://www.computerweekly.com/feature/Small-firms-bridle-at-e-business-risks
- Sukumar, Arun, and David Edgar. “E-business, SMEs and risks: towards a research agenda.” International Journal of Management Innovation Systems 1.2 (2009): 1-2. Print.