Risk Identification Paper

Introduction

E-businesses as well as consumers face a variety of everyday risks during interaction with each other. In terms of e-commerce, risk is viewed as the possibility of loss of confidential data or the destruction, generation, or use of data or programs that physically, mentally, or financially harm another party as well as the possibility of harm to hardware (Greenstein & Vasarhelyi, 2002, p.214).

This paper will explore the risk of e-business fraud, such as credit card fraud, identity theft, theft of intellectual property and brand fraud as well as ways to mitigate fraud risks.

Credit Card Fraud

According to the Federal Trade Commission, credit card fraud was the most common form of identity theft reported in 2005, followed by phone or utilities fraud, bank fraud, and employment fraud (Lindenmayer, 2006). Most consumers use credit cards to make purchases on the Internet because it gives them a sense of security unlike other forms payment. If the consumerÐŽ¦s credit card is used fraudulently, the consumer usually is not responsible for the charges if he or she followed the companyÐŽ¦s reporting procedures.

While the above process protects consumers, e-retailers must deal with additional issues like chargebacks. A credit card company will refuse to pay if a transaction is found to be fraudulent. An online retailer has to absorb these chargeback costs; tradition brick and mortar companies do not. The traditional company usually has a signed transactional receipt. This documentation is all that is needed to prove the credit card issuer authorized the request and as such, they will absorb the loss due to fraud.

Identity Theft

Identity theft usually goes hand-in-hand with credit card fraud. According to Lindenmayer (2006), ÐŽ§the average amount of fraudulent charges per victim rose 8.5% from 2004, to $6,383. That comes at a hefty price to businesses, as they absorbed 93% of the financial damage, or roughly $6,000 a victim last yearЎЁ.

Identity theft is easier than before because of the Internet. Network sniffers are used by criminals to capture customer data. With this tool, the criminal is able to capture a customerÐŽ¦s social security number, name, credit card information, and other pertinent information. The criminal then proceeds to open up account in the customerÐŽ¦s name or sell the personal data for a fee.

E-business must make every effort to protect employee and customer information. ÐŽ§While technical innovations like portals and self-service are making the exchange of information easier for employers and employees, they're also increasing the risk of data theft or misuse. Meanwhile, court decisions and legal requirements are imposing ever-stiffer penalties on custodians of personal information who fail to protect that sensitive data.ЎЁ (Moss, 2005).

Intellectual Property

Wikipedia (2006) describes intellectual property as ÐŽ§a legal entitlement, which sometimes attaches to the expressed form of an idea, or to some other intangible subject matter. This legal entitlement generally enables its holder to exercise exclusive rights of use in relation to the subject matter of the intellectual property. The term intellectual property reflects the idea that this subject matter is the product of the mind or the intellect, and that intellectual property rights may be protected at law in the same way as any other form of property.ЎЁ

Companies are facing increases risk of intellectual property infringement online. Legtimate companies post copyrighted content on their websites. With the sheer number of websites in cyberspace it is increasingly becoming more difficult to police and stop illegal distribution and use of copyrighted material. Intellectual Property not only covers web content but also includes trademarks, trade secrets, patents, web graphic, pictures, books etc.

Brand Fraud

Building a solid brand fosters customer trust. Criminals abuse a companyÐŽ¦s brand reputation by sending bogus emails requesting verification of account and personal information. The unsuspecting victim clicks on the link in the bogus email and types in the information requested giving criminals access to account, pin and password information. Armed with such information the criminal goes on to steal money from customer accounts, commit credit card fraud or develop phishing frauds. A recent report by the Anti-Phishing Working Group revealed they received 16,882 unique reports of phishing attacks that attempted to fool consumers with 93 different hijacked brands (Garretson, 2006).

Companies are also hurt because they spend many years and millions of dollars to build and protect their brand and image. When these types of scams occur, customers many be hesitant about doing business with that company or may not feel the company or may have difficulty distinguishing the legitimate company from the fraudulent one.

Mitigation Techniques

Companies can use a wide range of techniques to reduce fraud risk as indicated below.

Credit Card Fraud Prevention

„X Track and analyze customer-buying habits to be able to quickly identify fraud.

„X Prevent chargebacks by ensuring company name is easily identifiable on customer statements. In addition to the customer statement process, quickly produce