Risks in E-commerce at a Children’s Charity
Introducing an electronic stock control system in a children’s charity store is a positive and cost effective measure in any organization. With the enterprise depending on volunteer services, there is a need of controlling the stock in the company to guard against overstocking that leads to a high scrapping rate and under stocking that leading to losses in revenue (Kovacs et al., 2011). The major risk faced by the charity is that of increased expenses in running the system at the expense of re-stocking. Apart from the high initial cost of setting up the computerised system, there is a high cost involved payment of technicians for maintenance services and in running a website. The cost in training the personnel in using and familiarizing with the system also adds to the operating costs in the company. If the stocking system is not implemented the right way with poor implementation procedures set up, then there could be a consequence of losses in the long run due to high operation costs (Wang et al., 2008).
The major risk faced by the charity is that of increased expenses in running the system at the expense of re-stocking. Apart from the high initial cost of setting up the computerised system, there is a high cost involved payment of technicians for maintenance services and in running a website. The cost in training the personnel in using and familiarizing with the system also adds to the operating costs in the company. If the stocking system is not implemented the right way with poor implementation procedures set up, then there could be a consequence of losses in the long run due to high operation costs (Wang et al., 2008).
There is also a likelihood of falsified transfers and increased losses due to errors and omissions on the part of employees and managers. This risk can occur when the information fed to the system is incorrect. Because of the wrong information, the charity can run at losses where customers are underpaid or they could be overpaid ultimately ruining the reputation of the charity. Bamfield, 1994, asserts that in majority of enterprises that use the system, there is always programming errors that result in either loss of revenues or gaining of unexpected revenues hence no chance of getting a perfect balance.
Since the company has a limited capital base, it has a higher risk of being exposed to external factors such as: power failure where unexpected power cuts could ground operations in the charity depending on the system; presence of computer viruses that affect the performance of the system; and hackers who get past the company’s fire wall and get important and secure information or even end up stealing money.
There is also a risk of loss of customers who might find the system complex and confusing. This system will create trust issues where majority of people like dealing with what they are comfortable and understand when it comes to technology (Horne & Maddrel, 2002). The old associate technology with evil and low wage earners on the other hand see it as a cost increasing factor that would make goods expensive.
Solutions for the Risks
The listed risks faced by the children’s charity can be reduced or eradicated by implementing a four-step model strategy that Microsoft advised for companies using a stock management system. The four step model involves: 1. Access; 2. Identify; 3. Evaluate; and 4. Deploy as shown below (Kovacs, 2011).
Figure 1: Microsoft’s Four-Step Model
In using the model, the first thing that the company would do is assess all the stock system assets, such as EFT (Electronic Fund Transfer), EPOS (Electronics Point of Sale), and other automatic stock control systems. The security policies should be reviewed and a security assessment done in order to develop a framework of the best security amendments of the enterprise which is cost effective. Other functions that need to be assessed are the company’s financial performance in reference to expenses and revenue returns.
After assessment, the next phase is identification where all the possible risks are identified through brainstorming meetings (Kovacs, 2011).
The Evaluation step is done where the identified risks are ranked in order of priority. In our case, the risks that need to be curtailed in decreasing priority are: fraud, loss of income, power failures, viruses and hacker, and customer negative attitudes. The findings are documented and tested to see if there is a change in operations in the business.
The deployment phase marks the actual implementation of the recommendations that were suggested. In the company it is recommended that in curtailing fraud there should be an investment in the latest and fraud proof security software to be used in the system. In addition, there should be frequent system tests to check for leaks and bugs. The risk of loss of income can be reduced through charging for services on the system usage and at the same time providing an option for customers to use the old system. This will ensure there is enough money to service the system and operate it. Hazard of power failure can be eliminated through usage of generators and power back-up units.
Furthermore, coming up with educational programs, pamphlets, and advertisements on the benefits of the electronic system stock will reduce the risk caused by negative attitude of customers.
In implementing the recommendations, the benefits of an efficient system are achieved which includes: addressing of risks identified; understanding of the risks; and a way of combating the risks. Therefore the strategy is profitable if the risks are converted into opportunities.
Bamfield, J A N. (1994). Implementing EDI: Problems in managing retail/supplier relationships by technology, Logistics Information Management, 7(1), 7.
Horne, S. & Maddrel, A. (2002). Charity Shops: retailing consumption and society. New York: Routledge. Pp. 20-38
Kovacs, M. Farias, S. Moura, F. & Souza, A. (2011). Relations between Consumer Effort, Risk Reduction Strategies, and Satisfaction with the E-commerce Buying Process: The Development of a Conceptual Framework. International Journal of Management,2 28(1), 316-329,394-395.
Wang, Y., Wong, D., Lin, K., & Varadharajan, V., (2008). Evaluating transaction trust and risk levels in peer-to-peer e-commerce environments. Information Systems and eBusiness Management, 6(1), 25-48.
Yung-Shen Yen., (2010). Can perceived risks affect the relationship of switching costs and customer loyalty in e-commerce? Internet Research, 20(2), 210-224.