Running a Risk Assessment of Your eCommerce Business

eCommerce has become an escape route for many businesses that, as a result of restrictions due to the pandemic, have not been able to operate normally and many citizens have found an easier and safer way to buy in the online channel. This situation has caused that, at the European level, there has been an increase of almost 27% in online purchases and the appearance of 15 million new e-shoppers in 2020.

Due to the changes and uncertainty that we are experiencing, the population is accepting new realities. This includes what we buy, when, and how.

And with the growth of eComm, so did the risks associate with it. Risks range from hacker attacks, data breaches, website downtime, price competition to compliance violations.

Compliance professionals cannot be left out of this reality and must create a Risk Assessment Matrix.

How to evaluate your eCommerce Risks?

The main categories of risks are assumptive risks and operational risks. Assumptive risks are the assumptions you make when planning your venture; they include estimates of:

  • Market demand
  • Site traffic
  • Conversion rate
  • Average sales
  • Order volume
  • Costs of marketing
  • Costs of Website maintenance

If you are new in the eCommerce sector, you need to test and validate your assumptions. You can do this by performing intense industry research, observing your competitors, surveying prospective customers, and interviewing E-commerce experts. This knowledge will help you to make informed predictions and avoid increasing your risk exposure. When evaluating risks, you will realize that not all of them can be controlled.

Some uncontrollable risks are driven by:

  • Market forces
  • Economic conditions
  • Competitor strategies
  • Industry regulations

Instead of waiting for such scenarios to play out, you need to prepare a contingency plan to minimize the damage. For instance, if competitors slash their prices, you need a ready response plan to deploy quickly. Then, you can either reduce your price, market your product as more superior, or give your buyers incentives.

5 inevitable eCommerce risks you should watch out for:

  • Online Insecurity. eCommerce businesses are in constant danger from hackers, credit card fraudsters, extortionists, phishing attackers, and other types of cybercriminals. You could also encounter system failures such as a server crash and errors on the payment site.
  • Violating Intellectual property. Since there are many similar businesses to yours, you may unknowingly use a logo, motto, slogan, or product description related to another company. This can lead to lawsuits and penalties. Always perform a legal intellectual property audit and safeguard yours by registering it.
  • Customer Disputes. From time to time, you should expect to encounter customer disputes. For example, some buyers will complain, return products, or ask for refunds. Some conflict points include late delivery, wrong product delivery, failure to meet expectations, and accidental double charge.
  • Warehousing and Logistics. If your customers make large volume orders and you don’t have enough stock, you can end up losing money and having dissatisfied customers. Other challenges include mis delivery and late shipment. You should use an inventory management tool and work with an established drop shipping service to avoid such risks.
  • Taxation. eCommerce taxes are complex and confusing since they vary across different delivery locations. Failure to understand what is required can lead businesses to expose themselves to tax risks.

If you are an eCommerce company, you are bound to encounter some forms of risks. Some will require your utmost dedication to mitigate them, while others are nonconsequential. To guarantee your business’s long-term survival, use a risk assessment matrix to quickly identify what could go wrong and estimate the potential damage that could arise from the event occurrence. This way, your eCommerce business will be in a position to prioritize the most significant threats and mitigate them early.

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