How to manage the risks of online businesses


The Internet has brought tremendous possibilities for entrepreneurs to grow their businesses and earn more money. At the same time, while it can dramatically help you grow your business outside your zip code, the global exposure which it brings also increases the risks your business faces. ‘

Some of them could significantly damage or even kill your business. When operating online, therefore, you must understand the risks and keep them under consideration while you make your decisions. The goal should be to minimise your risks so they do not end up hurting your business, online or offline.

Intellectual Property Risks

As an online entrepreneur — and anyone with a business website counts as such — you have no real choice other than to get at least a rudimentary understanding of intellectual property (“IP”) principles. You don’t need the in-depth knowledge of a lawyer, but you should have a general understanding of what you should do and what you shouldn’t do, and be able to understand when it is time to obtain legal help.

In short, simply because something is available freely, does not mean that you can use it. Almost any way of capturing an idea in a fixed medium is protected by copyright — which is to say nearly everything on the Internet.

Photos, graphics, text, videos, and more. As a rule, unless the person who created it has explicitly stated you can use it for your business, you need to obtain permission before you do or create your own.

While it can be tempting to “borrow,” it’s much smarter to use the inexpensive technologies available to create your own — or spend a small sum of money to legally license content from a company which specialises in supplying content, like a stock photo library. Not only does this prevent your business being sued into bankruptcy, but it has the powerful benefit of helping build a lasting, meaningful brand for your business.

The Risks of Selling Overseas

As you are likely already aware, if you sell products or services online, you must have Terms and Conditions which govern the transaction. But what many businesses fail to realise is that if you sell overseas, you are subjecting your business to the regulations and laws in those jurisdictions. Your clients could sue you in a local court there, and even have your business closed down.

Whilst the best way to protect yourself against this would be to have lawyers in every country where you do business draft a new Terms and Conditions for that country, this would be expensive.

More economical is to ensure your Terms and Conditions contain a ‘Governing Law’ clause under which your customers agree the transaction is subject to the laws of the Australian State which you nominate. To give this added force, customers should agree to the Terms ‘actively’ — such as by ticking a box or otherwise giving their positive consent.

The Risk of Security Breach

Whenever you start doing business online — in particular accepting credit card payments — you also become a target for hackers and data breaches. A single breach of customers’ sensitive data may result in negative publicity, fines, and a loss in your organisation’s trust and credibility.

In order to protect yourself, you should ensure everyone in your organisation understands the security and fraud considerations,and understands the policies you’ve chosen to implement, in order to manage risk.

Your customers should also be aware of your policies: in addition to the Privacy Policy (required by privacy law if you collect any personal information on your clients), shipping, billing, and refund policies, it’s worth having an Information Security page which educates customers on your security controls and practises.

None of this, of course, will do you any good if you do not actively take steps to protect your business from an electronic intrusion. This is best done by specialists who can check your website for viruses, assess how vulnerable you are to hackers, make sure passwords are changed regularly, perform software updates on a regular basis, and ensure all sensitive data is encrypted so it cannot be accessed without a special key.

Finally, as an e-commerce organisation, you are likely required to be in compliance with the Payment Card Industry (PCI) standards. If you fail to do this, you could be exposed to serious fines or even lose the ability to accept payments.



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