Module in International Finance with e-Banking

Cagayan State University- Andrews Campus

College of Business Entrepreneurship & Accountancy
(For 3rd year BS Legal Management students only)

Learning Objectives:
1. Understand the difference between banking and banks.
2. Discuss the history of digital banking
3. Understand the importance of Digital marketing
4. Analyze the digital transformation
5. Analyze the difference between Digital Banking and Online Banking

Introduction:
Banking is defined as the business activity of accepting and safeguarding money owned
by other individuals and entities, and then lending out this money in order to conduct
economic activities such as making profit or simply covering operating expenses.
A bank is a financial institution licensed to receive deposits and make loans. Two of the
most common types of banks are commercial/retail and investment banks. Depending
on the type, a bank may also provide various financial services ranging from providing
safe deposit boxes and currency exchange to retirements and wealth management.
Banks are a safe place to deposit excess cash. The FDIC insures them. Banks also pay
savers a small percent of the deposited based on an interest rate.
Banks are currently not required to keep any percentage of each deposit on hand,
though the Federal Reserve or The Fed can change this. That regulation is called the
reserve requirement. They make money by charging higher interest rates on their loans
than they pay for deposits.
Digitalization is changing how people interact and do business on a day-to-day basis,
and advancements in banking technology are continuing to influence the future of
financial services around the world. An increasing demand for a digital banking
experience from millennials.
From retail and mobile banking, to neobank startups, technology has its hand in
seemingly every aspect of the banking industry; and, the influence of technology will
continue to launch banking into a digitized future.

Activating Prior Learning

Let’s take a look on the chart. Complete the KWL chart below. The last column which
pertains to what you have learned shall be accomplished after the discussion.
Methodology:
The teaching and learning methods will be a blend of the following:
 Virtual Discussion
 Reflections
 Readings on current topics
 Forum/ Student discussions
 Course work/ Online activities
 Student presentations

SO LET’S LEARN
Presentation of Content:

Future of Retail Banking

Technology geared toward improving retail banks’ operational efficiency is positively
impacting the market. According to Insider Intelligence, 39% of retail banking executives
say that reducing costs is where technology has the greater impact, compared to only
24% who say it’s improving customer experience.
Retail banks are also launching platforms in the banking-as-a-Service (BaasS) space to
remain competitive.
For example, UK neobank Starling used to exclusively offer business-to-consumer
(B2c) retail banking services; but, after launching a BaaS platform, Starling diversified
its product and revenue streams, helping it remain relevant in the neobank space.
Future of Mobile Banking
Mobile banking has become the go-to method for users to make deposits, account
transfers, and monitor their spending and earnings-and a key differentiator for banking
leaders. Nearly 80% of our survey respondents who have used mobile banking say it is
the primary way they access their bank account.
Since the onset of the coronavirus pandemic, mobile capabilities is a more significant
factor in bank selection among respondents than it was last year. Financial institutions
should understand which mobile banking features consumers value most and where
they stand compare to their competitors, so they can pinpoint specific areas to devote
the most attention to.
The foremost concern consumers have when mobile banking remains security. The fear
of data breach increases the demand for services that keep user’s data secure-allowing
consumers to place holds on credit or debit cards, schedule travel alerts and file and
review card transaction disputes are some successful security banking features. Online
banking, which includes mobile banking, refers to the overall experience of banking
through digital channels, including mobile apps, desktop, live chatbots (this is a
software application used to conduct an on-line chat conversation via text or text-to-
speech, in lieu of providing direct contact with a live human agent) and more.

Future of Online Banking

Thе рорulаrіtу оf mobile banking has ѕurраѕѕеd thаt of оnlіnе bаnkіng, аnd thе оvеrаll
numbеr оf online сuѕtоmеrѕ has slowed wоrldwіdе. According to Insider Intelligence,
mоbіlе bаnkіng іѕ grоwіng at fіvе tіmеѕ the rаtе of оnlіnе banking, and hаlf оf аll
оnlіnеоnlіnе сuѕtоmеrѕ are аlѕо mоbіlе bаnkіng users.
Dеѕріtе this growing popularity, ѕоmе banks ѕtіll fаll short оn the dеmаnd fоr mobile
tаѕkѕ, lіkе bіll рау and rеwаrd redemption, саuѕіng thеm to push uѕеrѕ tо оnlіnе
bаnkіng. However, even this push wоn't bе enough to рорulаrіzе online bаnkіng аѕ
mіllеnіаlѕ аnd Gen Zеrѕ соntіnuе grаvіtаtіng tоwаrd thе mobile mаrkеt.
Dіgіtаl-оnlу bаnkѕ, аlѕо knоwn аѕ nеоbаnkѕ, аrе rеdеfіnіng thе future оf bаnkіng аrоund
the wоrld. Thоugh оff tо a ѕlоw ѕtаrt іn the US duе tо high rеgulаtоrу barriers, rесеnt
dеvеlорmеntѕ and thе loosening оf regulations suggest thаt US nеоbаnkѕ are ѕеt tо
take off.

What Iѕ Dіgіtаl Bаnkіng?

Dіgіtаl Banking іѕ tаkіng fіnаnсіаl аѕѕеtѕ and mоvіng thеm from trаdіtіоnаl activities tо
оnlіnе рlаtfоrmѕ. Thе рrосеѕѕ оf digitizing bаnkіng activities includes moving cash
dероѕіtѕ, wіthdrаwаlѕ and transfers, thе mаnаgеmеnt оf accounts, аррlуіng fоr fіnаnсіаl
рrоduсtѕ, mаnаgіng lоаnѕ, рауіng bills аnd any ассоunt ѕеrvісеѕ оnlіnе. Thеѕе wоuld
typically be реrfоrmеd in a financial institution ѕuсh as a bаnk, hоwеvеr thеу аrе аwау
frоm thаt.
Wіth the dеvеlорmеnt оf technology, consumers are being given easier ассеѕѕ tо
mоbіlе devices thаt have access to оnlіnе ѕеrvісеѕ and digital ѕеrvісеѕ. Phуѕісаl bаnkѕ
are lоѕіng оut on орроrtunіtіеѕ to expand duе tо the fаѕt-mоvіng transformation of digital
ѕеrvісеѕ as customers аrе wіllіng tо ѕwіtсh services fоr unique dіgіtаl features ѕuсh аѕ
оnlіnе bіll pay, mоbіlе рауmеntѕ, fаѕtеr trаnѕfеr speeds аnd соnvеnіеnt loan
аррlісаtіоnѕ.
Banks аrе not ѕоlеlу rеlуіng оn investments оn thеіr physical locations anymore, as
mоrе banks ѕее grоwth іn digital services аnd most uѕеrѕ nоt nееdіng tо go to рhуѕісаl
bаnkѕ аnуmоrе. By соnvеrtіng to dіgіtаl features, bаnkѕ аrе uѕіng thеіr іnvеѕtmеntѕ to
саtеr to younger сuѕtоmеrѕ whо аrе mоrе likely tо uѕе updated technology аnd
thеrеfоrе extend thе lіfеѕраn оf their bаnkіng соmраnу.

History of Digital Banking

1993 – Tеmеnоѕ AG wаѕ founded, whісh is a bаnkіng ѕоftwаrе system рrоvіdеr that
ѕuрроrtѕ rеtаіl, private, соrроrаtе, соmmunіtу, and оthеr types bаnkѕ.
1994 – Onlіnе banking іѕ buіlt into Mісrоѕоft Mоnеу, whісh wаѕ оnе оf thе fіrѕt оnlіnе
bаnkіng/fіnаnсіаl ѕоftwаrе. Thіѕ wаѕ one of thе fіrѕt bаnkіng accounts accessible tо
ѕtаndаrd households.
1997 – Cаnаdа lаunсhеѕ Tаngеrіnе, thе first digital-only bank іn thе аrеа.
1998 – The United Stаtеѕ lаunсhеѕ Internet Bank, the first dіgіtаl-оnlу bank in the аrеа.

How Important is Digital Marketing

Thе dіgіtаl rеvоlutіоn hаѕ сhаngеd mаnу еlеmеntѕ wіthіn аlmоѕt еvеrу industry,
especially thе fіnаnсіаl іnduѕtrу. The nеw technology wave thаt hаѕ ѕtаrtеd thrоughоut
thе еntіrе fіnаnсе іnduѕtrу hаѕ сhаngеd a lоt оf thе bаnkіng ѕtruсturеѕ thаt wеrе
trаdіtіоnаllу set uр. Autоmаtіоn is оnе оf thе bіggеѕt fосuѕеѕ that bаnkѕ are looking аt
because technology is іnсrеаѕіnglу grоwіng.
Bаnkіng ѕоlutіоnѕ hаvе changed drаѕtісаllу ѕіnсе thе іntrоduсtіоn of оnlіnе оnlіnе
banking орtіоnѕ. Thеrе аrе mаnу options tо wіthdrаw money, dероѕіt сhесkѕ, оr
trаnѕfеr mоnеу without gоіng tо thе bаnk and, wіth tесhnоlоgу advancements, аll thіѕ
hаѕ rеvоlutіоnіzеd. Cybersecurity аnd dаtа protection hаvе аlѕо improved drаѕtісаllу
since thе entire industry has ѕhіftеd tо mоrе dіgіtаl bаnkіng options. Fасtоrѕ ѕuсh аѕ
оnlіnе bаnkіng, ATM mасhіnеѕ, fіnаnсіаl іntеgrаtіоn, аnd 24-hоur ассеѕѕ hаvе сhаngеd
the оutlооk fоr whу thеrе іѕ a nееd for dіgіtаl bаnkіng.
Wіth thе еmеrgіng tесhnоlоgу оf dіgіtаl banking, there аrе аlѕо mаnу innovations that
have bееn ѕuссееdіng such аѕ mоbіlе dіgіtаl wаllеtѕ, іnvеѕtmеnt mаnаgеmеnt
аррlісаtіоnѕ, depositing mоbіlе checks thrоugh banking аррlісаtіоnѕ, саrd-lеѕѕ ATM
wіthdrаwаlѕ, аnd mаnу mоrе ѕоlutіоnѕ towards thе еmеrgеnсе оf dіgіtаl bаnkіng. Thе
difference between dіgіtаl bаnkіng and online bаnkіng іѕ thе аѕресt оf traditional
solutions соmраrеd tо uѕіng nеwеr mеthоdѕ оf digitalization. Onlіnе bаnkіng аllоwѕ
реорlе to check transfer аnd mаnаgе their funds glоbаllу thrоugh a variety оf dіffеrеnt
options. Mаnаgеmеnt ѕоlutіоnѕ bеіng соnduсtеd in a more accurate and fаѕtеr way іѕ
сrеаtіng a positive potential іn fіnаnсеѕ.

Dіgіtаl Trаnѕfоrmаtіоn
At the beginning оf the digital ѕhіft, households wоuld gаіn ассеѕѕ tо their accounts. Aѕ
time wеnt on, services thаt were trаdіtіоnаllу hеld іn brісk аnd mоrtаr, physical
lосаtіоnѕ. Aѕ tесhnоlоgу рrоgrеѕѕеd, more dеvісеѕ gаіnеd ассеѕѕ tо bаnkіng ѕеrvісеѕ
online. In оrdеr tо keep uр wіth thе tіmеѕ, bаnkѕ needed tо lеаd thе way fоr financial
institutions bу adapting to dіgіtаl times.
Dіgіtаl Bаnkіng vѕ. Trаdіtіоnаl Bаnkіng
Traditional banking hаѕ three dіѕtіnсt components:
1. Cаріtаl
2. Deposits
3. Loan

Cаріtаl
The ріllаrѕ of Trаdіtіоnаl Banking (Deposits & Loans) rest upon the fоundаtіоn of
Cаріtаl. All bank must have ассеѕѕ to Cаріtаl, which іѕ lеvеrаgеd with deposits and
then рrudеntlу соnvеrtеd іntо lоаnѕ that gеnеrаtе job and есоnоmіс growth. Friends of
Trаdіtіоnаl Banking ѕuрроrt policies that fасіlіtаtе the flоw of capital іntо оur banking
system аnd which аllоw market drіvеn returns to be earned оn capital that іѕ рlасеd at
rіѕk. We орроѕе аnу policies that make it more dіffісult to аttrасt саріtаl into thіѕ сrіtісаl
process.

Deposits
Onсе Capital is invested, іt іѕ lеvеrаgеd through the collection of deposits that rерrеѕеnt
the ѕаvіngѕ or liquid rеѕеrvеѕ оf іndіvіduаlѕ and buѕіnеѕѕеѕ in the соmmunіtу. Thе
соllесtіоn оf thеѕе dероѕіtѕ is facilitated by thе fасt thаt thеу аrе іnѕurеd uр tо $250,000
bу thе full fаіth аnd сrеdіt of the U.S. Government thrоugh thе Fеdеrаl Dероѕіt
Inѕurаnсе Corporation (FDIC). This guarantee lоwеrѕ thе rеԛuіrеd rеturn and rеѕultѕ in
аn аррrорrіаtе lеvеl of regulation. Dероѕіtоrѕ hаvе rеаdу access tо their dероѕіtѕ
thrоugh a numbеr оf tools (і.е. сhесkѕ, dеbіt саrdѕ, internet, аnd other еlесtrоnіс
trаnѕfеrѕ, еtс.) Frіеndѕ оf Traditional Bаnkіng ѕuрроrtѕ роlісіеѕ that рrоmоtе thе аbіlіtу
tо аttrасt deposits аnd oppose роlісіеѕ thаt unduly іnсrеаѕе the соѕt (rеgulаtоrу or
financial) оf those dероѕіtѕ, or in аnу way dіѕruрtѕ аn іndіvіduаl'ѕ оr buѕіnеѕѕ' ассеѕѕ to
thеѕе dероѕіtѕ.
Loans
The combination of Capital and FDIC insured deposits constitutes the basis for the
amount of money that can be disbursed in loans. Prudent loans to individuals and
businesses drive healthy economic growth.

BENEFITS OF DIGITAL BANKING

Cost Reduction
The reinvestment of money into digital services help reduce the cost of operations for
traditional banks. This reduces labor costs, upkeep for location, rent costs, and possible
extra physical costs that come with running a brick and mortar.
Agility
By moving into the digital space, this makes data transfers go quickly, which allows for
more time to work on other aspects of the online banking experience. This speed also
allows users to spend less time in banking services and use their time efficiently.
Viability
The rate at which online services operate is incredibly successful, as most services are
done on secure servers that allow for privacy, security, quick and efficient services, and
monitored transactions.
Increase in Revenue
With more accessibility, this creates a larger market and audience for services, which
will ultimately increase revenue to the business. Financial institutions will be able to
service more customers and corporations to help with their increased demand and
services.
Attract and Retain Customers
Customers tend to stay loyal to companies that adapt and innovate, as there becomes
less reasons to move into a different service or company. With assets constantly being
monitored and services being updated, customers are able to be attracted by these
features and stay because of them.
Stay Ahead of the Competition
By staying ahead of the competition, financial institutions can predict trends and help
retain customers as well as stay updated more than their competition in order to retain
the audience they have. This can help attract a larger audience and help make them
leaders in their industry.
Remain Compliant with New Legislation
With more policies and restrictions released with technology, service and institutional
rise, being compliant with legislation helps financial industries create systems that are
fair and updated with the latest rules and regulations.

RISKS & CHALLENGES

1. Legacy Platforms

Legacy core banking systems are often decades old, mainframe based platforms
that support a bank’s back end operations across core functions such as account
opening, account set up, transaction processing, deposits processing, loan
processing and more. Due to legacy technology, proprietary data models, and
limited ability to interface with other systems, legacy systems can restrict a
bank’s ability to rapidly deliver new experiences, products and services.

Legacy cores tend to be older and hold important information regarding banking,
and those can become obsolete and inaccessible with the shift to digital banking.
These files can be transferred and uploaded, however, that takes a lot of manual
labor and sometimes institutions are not able to upkeep those files because
established banks often feel cornered by their legacy core systems, many see
investing in new core systems for digital services as a strategic priority. Digital by
design, new cores rely heavily on the cloud and associated services, introduce
dynamic pricing to cut costs and reduce complexity by eliminating paper
processes. In addition, banks use new platforms to implement digital channels,
enhance the customer experience, and launch new products and services faster
than before.
 2. Finding the Right People to Transform

Some people are just used to the old school ways of operating and prefer in
person-banking. It can be complicated and some may not understand it well, so
shifting to a completely digital platform can use a barrier of accessibility to certain
audiences.
3. Winning and Retaining Customer’s Trust

With word of fraud, digital attacks, and cyber threats, winning and retaining
customer trust can be difficult. Even with smaller instances or one big one, this
can derail any momentum on gaining the trust of customers and they may turn to
another method of banking quickly.

4. Meeting Regulatory Requirements

With new regulations and rules in place as the shift to online banking continues, it
is sometimes difficult to maintain compliant to these rules as they are new,
difficult to understand, and may cost more capital to upkeep.

DIGITAL BANKING SOLUTIONS

There are many different digital solutions which help cater to different customers’
needs. These solutions come from the difference in loan software. Loan software
puts into view the design and facilitation of the service of providing loans.

There are multiple types of banking products and services. To qualify as a Digital
Banking Platform/Solution they must contain the following things:

a. Delivery of digital services through different channels

b. Be able to facilitate the services for quality consumer communication and
service
c. Management of lending and non-lending products within a digital platform.
d. Design use specifically for online banking.
e. Support for third-party system and networks.

What is the Future of Digital Banking?

The leading talk of digital banking revolves around artificial intelligence or AI. As more
AI technology is set in place in other industries, banking is looking to advance their AI
tools to help service more companies and save on time and efforts in that department.
AI is the perfect asset to help aid millennials with online banking and can help teach
older generations to efficiently bank digitally.
These technologies can develop personal connections as well as easier workflows
when working with one’s financial situations. Although, costly, it could very well be the
future.

Digital Banking Industry Trends

One industry leading trend is the move to mobile banking. As more users have
accessibility to smart phones, it becomes easier to roll out services to help them out.
With the rise of Banking-As-A-Service (BaaS), accounts are able to present options for
customers to work within their digital space.

2001 Online banking expands to cover 20 million unique users, with at least
eight different US banks crossing the plateau of 1 million different users

2007 The launch of the first iPhone begins pivotal shift to digital banking with
users given access to their banking information on the go.
2009 Online banking reaches 54 million sole users in the US alone
2016 Millennials push the transition to digital banking preferences, giving a
signal to banks to work towards more online options.
2018 Temenos (Temenos AG is a company specialising in enterprise software
for banks and financial services, with its headquarters in Geneva,
Switzerland) acquires competitors and grows to be the leader of providing
digital customer options for most financial organizations.
2019 Temenos acquires mobile app leaders to create and empire of digital
banking services

Difference between Digital Banking and Online Banking

With more and more people conducting most of their banking through the use of
technology, it can be difficult to define what the difference between all the different
terms are.
Even people with the most rudimentary understanding of technology will have heard
terms: online banking, digital banking and, in the last few years, mobile banking.
We may be forgiven for thinking that they are all pretty much on in the same thing, but
there are certain differences which you may need to be aware of.
First of all, let’s define what each of the terms mean and what their main features are:
Online Banking- it refers to any banking transactions that can be conducted over the
internet, generally through a bank’s website under a private profile, and with a desktop
or laptop computer. These transactions include services traditionally offered at local
branches without having to go to one.
Online banking is generally defined as having the following characteristics:
a. Financial transactions are conducted over the internet through a bank’s secure
website
b. The bank may have physical branch locations or it may exist only online.
c. The user must register with the financial institution online and create a login ID
and password.
Customers can perform financial transactions while banking online, like paying bills or
transferring money from one account to another.
Other basic activities include:
a. Viewing account balances at any time of the day.
b. Viewing or printing statements
 c. Viewing images of checks
d. Applying for loans or credit cards
In essence, a customer can do almost any activity online that he or she would be able to
do in person when visiting a branch.

Digital Banking
Ways Digital Banking Drives Revenue Growth
Increased use of smartphones and superior digital apps are driving the increase of
digital banking. Digital banking is traditional banking activities and programs that
customers were only able to do inside a bank are done online. Not only does digital
banking drive revenue growth, but in our digital world, banks must adopt a new model
that is more customer-centered. They must increase their online products and provide
customers with more service channels.

Digital Attacking
This allows banks to enter new markets, potentially in other countries, without having to
put a physical building in any of those new locations. Banks can create digital channels
and new businesses to attract more customers in a short amount of time. Since these
are digital channels, the banks do not have to create expensive storefronts. This way,
the banks can bring in income without having to put out additional income in
infrastructure.

Additional Activity:
I would like you to read on the following:
1. Monetize data
2. Broaden Financial Reach
3. Focus on the Customer Journey
4. Bill Pay
5. Cloud Computing
Steps to Staring a Digital Banking Transformation
1. Outline your Objectives
2. Study Competitors and your Product Offerings
3. Assess Processes
4. Evaluate Culture and Willingness to Adapt
5. Analyze Talent and Recruiting
6. Inventory Systems and Products
7. Define Customer and Member Segmentation
8. Consider your Communication and Marketing Plans
9. Conduct a Risk Assessment
10. Prioritize

Digital Banking Compliance

Digital banking compliance has the added risk exposure of needing to maintain strict
compliance in multiple countries for cross-border transactions along with the increased
risk of losses due to cyber-attacks and fraud.
Focus on Residual Risk- instead of monitoring and documenting all risks and all
controls, there is more focus on the management residual risk by suing breakpoints in
the critical processes. This helps to ensure that any material risk is noticed. The goals is
to have the breakpoints trigger a response that is risk-based with enough oversight and
remediation efforts made before a problem gets out of control.
Integration
The governance of risk management with regulations is achieved by a risk management
framework that is fully integrated to work with a bank’s operational-risk protocols and
procedures.

Activity: Read on Money Laundering

Conclusion
As times evolve, digital banking has become an incredibly trendy and worthwhile
investment for banking institutions. Online banking has become a culture that has
customers in mind as well as their business and industry.
Being able to service more customers in efficient ways is how banking is evolving
towards a digital space. As technology grows, so will banking and Banking-As-A-
Service (BaaS) will help expand the industry.

HAPPY LEARNING!!!

E-COMMERECE

What is Commerce
 According to Dictionary.com, commerce is a division of trade or production which
deals with the exchange of goods and services from producer to final consumer
 It comprises the trading of something of economic value such as goods, services,
information, or money between two or more entities.
 Commonly known as Electronic Marketing
 It consists of buying and selling goods and services over an electronic system
such as the internet and other computer networks.
 E-Commerce is the purchasing, selling and exchanging goods and services over
computer networks (internet) through which transaction or terms of sale are
performed electronically.
Why Use e-Commerce?
  Low Entry cost
 Reduce transaction costs
 Access to the global market
 Secure market share

Brief History of e-Commerce

The E-Commerce evolution can be credited to a combined form of technological
innovations and regulatory reforms. Internet has played a crucial role in the evolution of
E-Commerce platform. Revolution in this regime took off in 1960s when the internet was
introduced for the first time in front of the world.
The next major boost in E-Commerce scenario took place with the introduction of World
Wide Web (WWW) and internet browsers in 1990s. Major innovations in field of E-
Commerce took place in 1970s that hugely influenced the E-Commerce and helped it
grow expansively.
Some of the major innovations that took place during that phase are:
1970s- Electronic Funds Transfer (EFT), used by the banking industry to exchange
account information over secured networks.
 EFT is a payment method that replaces sending a physical paper check. The
payments are made electronically from one party to another using internet
Late 1970s and early 1980s- Electronic Data Interchange (EDI) for e-commerce within
companies, used by businesses to transmit data from one business to another.
 EDI is a revolutionary step in digitalizing the paper-based exchange of business
documents. These electronics-based transfers of documents have made the life
of businesses very prompt and safer. The major benefits enjoyed by the
businesses are increased processing speed of documents, reduced errors during
transit of documents, reduced cost and improved relations with business
partners. This EDI had soon expanded this electronic transfer, only from financial
transactions to multiple transaction processes types.
1990s- the World Wide Web on the internet provides east-to-use technology for
information publishing and dissemination., cheaper to do business (economies of
scale), enable diverse business activities (economies of scope)

Inter-Organizational System (IOS)

 IOS a system that allows the information to flow automatically between the
concerned organizations in order to achieve a desired supply-chain management
system, and this plays a crucial role in the development of competitive
organizations

The Process of e-commerce

 A consumer uses web browser to connect to the home page of a merchant’s web
site on the internet
 The consumer browsers the catalog of products featured on the site and selects
items to purchase. The selected items are placed in the electronic equivalent of a
shopping cart.
  When the consumer is ready to complete the purchase of selected items, she
provides a bill-to and ship-to address for purchase and delivery.
 When the merchant’s web server receives this information, it computes the total
cost of the order, including tax, shipping, and handling charges, and then
displays the total to the customer.
 The customer can now provide payment information, such as a credit card
number, and then submit the order.
 When the credit card number is validated and the order is completed at the
Commerce Server site, the merchant’s site displays a receipt confirming the
customer’s purchase.
 The Commerce Server site then forwards the order to a processing network for
payment processing and fulfillment.

Types of e-Commerce
1. Business-to Business (B2B)
 It consists of largest form of Ecommerce. This model defines that buyer
and seller are two different entities. It is similar to manufacturer issuing
goods to the retailer or wholesaler.
 The simple explanation of B2B E-Commerce is E-Commerce between
companies and comprises businesses directing e-purchase, negotiating
purchase transactions, network associations, and supply chain
management over the internet. Businesses make use of E-Commerce to
reduce costs of transactions while conducting business and to make
reserves in terms of time and effort when carrying out a business. Being
the main group of ecommerce, most experts project that B2B E-
Commerce will constantly rise faster than the B2C segment.
Example:
Dell deals computers and other associated accessories online but it does not
make up all those products. So, in govern to deal those products, first step is to
purchase them from online business (ex: the producers of those products)
2. Business-to-Consumer (B2C)
 It is the model taking business and consumers interaction. The basic
concept of this model is to sell the product online to the consumers.
 B2C is the direct trade between the company and consumers. It provides
direct selling through online.
 Business-to-consumer E-Commerce is defined as business between
companies and consumers.
 It includes customers collecting information; buying physical goods (i.e.,
tangibles such as consumer products or books) or information goods i.e.,
goods of electronic material or digital content, such as electronic books
and software; and, for information goods, getting products through an
electronic network. This is the largest and oldest form of E-Commerce.
For example: If you want to sell goods and services to consumer so that
anybody can purchase any products directly from supplier’s website.
3. Business-to-Employee (B2E)
 Business-to-employee electronic commerce uses an intrabusiness
network which allows companies to provide products and/or services to
their employees. Typically, companies use B2E networks to automate
employee-related corporate processes.
 4. Consumer-to-Consumer (C2C)
 Consumer-to-consumer E-Commerce or C2C can be defined as
commerce between private individuals or consumers. Being considered by
the development of electronic market-places and online auctions, mainly
in situation of vertical businesses where firms/businesses can propose for
the things they require from numerous suppliers, it possibly has the
extreme potential for developing new markets.

There are many sites offering free classifieds, auctions, and forums where
individuals can buy and sell. Thanks to online payment systems like Paypal
where people can send and receive money online with ease. E-bay’s auction
service is a great example of where person-to-person transactions take place
every day since 1985.
5. Business-to-Government
 Generally, Business-to-government E-Commerce or B2G is described as
business between companies and the public sector. In other words, it is
referred to as use of Internet for public procurement, many government-
related operations, and licensing procedures. This type of E-Commerce
has two characteristics: first, the public sector undertakes an important
role in founding E-Commerce; and second, it is expected that the public
sector has the highest requirement for making its obtaining system more
active. Policies of web-based purchasing raise the clearness of the
procurement process (and thus decrease the risk of indiscretions).

PROS & CONS of e-Commerce

Pros
 No checkout queues
 Reduce prices
 You can shop anywhere in the world
 Easy access 24 hours a day
 Wide selection to cater for all consumers

Cons
 Unable to examine products personally
 Not everyone is connected to the internet
 There is the possibility of credit card number theft

IMPORTANCE OF e-COMMERECE in DEVELOPING COUNTRIES

Importance of E-Commerce in Developing Countries Internet and E-Commerce is
currently very much beneficial for developing countries and its budding entrepreneurs.
Five important ways by which E-Commerce help the developing nations grow are:
1. E-Commerce helps in facilitating the access of Small and medium enterprises
(SME) at a global platform.
2. It also helps in facilitating the development and promotion of tourism sector of
developing countries at a larger scale in global market. More exposure is
 provided to this sector and innovation is the key to success for this particular
domain.
3. It helps in expanding the market for agricultural and tropical products in
international market. This is timesaving and cost-effective at the same time.
4. New avenues get build for firms located in remote areas of developing countries.
It helps them in entering into B2B and B2G supply chains at national and
international level.
5. It assists service-providing enterprises in developing countries by allowing them
to operate more efficiently and directly provide specific services to customers
globally.

Small and medium enterprises in developing countries have now expanded their
market due to its ability to transact directly with the customers at an international
level and have the opportunity to advertise their goods and services globally. The
tourism sector has grabbed the opportunity really well and has achieved a higher
market position by adopting E-Commerce at an extensive level. It lends
assistance in compiling a list of all the services offered by them category wise at
their website. Moreover, small, and medium enterprises in developing countries
have an easy and quick accessibility to internet and find it most reliable and
inexpensive means for the acquisition of online technical support and software
tools and application. Lodging technical inquiries and placing an order for
replacement or new tools have now become easy for this sector due to the
introduction of E-Commerce in developing countries. E-Commerce has now
become an essential tool for entrepreneurs of developing countries to connect
their businesses on an international platform. Despites many constraints, E-
Commerce has managed to attract not just new and budding entrepreneurs but
have helped the established one give a tough competition to its competitors by
adopting various techniques in the same field.

CHALLENGES OF e-commerce

1. Maintaining Loyalty of Customer

 It does not matter how attractive any website looks. If an individual is
not able to build the customer trust or loyalty with the consumers, their
business has to struggle any day later or sooner. It takes a lot of efforts
 for companies to establish new customer and maintain same customer
loyalty for longer time.
 One of the prime reason behind the struggle of ecommerce companies
is to build trust and loyalty with the customers because both sellers
and buyers do not know each other, as they cannot interact while
making transactions, which happens while doing street shopping. In
general, company takes some few transactions, lots of time and plenty
of efforts to build trust and loyalty of customers.
Solution:
In order to earn loyalty of customers, the companies should provide excellent customer
service. It is the duty of companies to make sure that customer is satisfied with the
services right from ordering the product online to its shipping to destination. In digital
market, there is a huge platform for online retailers that sell out the same product in the
market for which one has to identify the core competitive advantage to nurture the trust
of customers accordingly.
Some of the simple ways to increase the trust among the consumers are as follow:
1. By display of address, phone number and pictures of staff, customer
testimonials, and credibility badges in website.
2. By adding live chat option to website.
3. By creation of blogs.
4. Customer service should be priority. It is a point to remember that, “it’s always
easy to maintain an existing customer then to find new one.”
5. Creating loyalty programs as these points are not transferrable from one
company to another so the customer ensures to make their next purchases from
one preferable site.

2. The Headache of Product Return & Refund

In a survey conducted by comScore and UPS, it was found that 63% of total
American consumers check for return policy before making any purchase and
around 48% of people shop more with those retailers that offer hassle-free
returns than those who provide terms and conditions. These facts clearly depict
that how consumers look for authenticated and hassle-free return and refund
policy.
Once a customer login and signs up on the portal of E-Commerce website, the
company is completely unaware about all the details of customers except the
information entered by the customer. This results in the doubt on trustworthiness
of customer, which leads to the rise of many questions regarding the faith of
customers. Hence, all these situations might lead to chances where some of the
customers opt for Cash-On-Delivery (COD) option, and after placing the order,
they refuse to accept the product. Hence, these actions result in huge losses of
revenues for many emerging and well-established E-Commerce companies.
When a product is returned due to dissatisfaction of customer then business of
E-Commerce has to suffer heavy loss with regard to shipment of products and
reputation of a company. For those companies who deliver the product free of
cost, the cost for the company in terms of logistics and shipping have always
been scary and burdensome for them.
Solution:
Both return and refund policies are a part of customer services and to underestimate
both of these policies will turn out to be a big mistake for retailers. The best thing any
firm can do is to build strong return and refund policies. In the same context, some of
the considerations are given below to be kept on mind while designing return policies:
1. Companies should never hide their policies and must be transparent.
2. All the companies should use plain and simple English that can be easily
understood by everyone. This is because not all the customers who will read
the policy terms and conditions will be highly intellectual to understand them.
3. Usage of some scary stuff in the policies like, “you must,” “you are required,”
must be avoided as too harsh policy measures may stop the customers to
purchase the product.
4. Companies should clearly outline what all they can expect from their
customers and they should provide them with the various options for easy
payments and shipping.
5. The staff must be well equipped regarding all the information about return
policy such that they can easily assist customers to make quick and effective
orders.
6. Companies should be well prepared to face the cost of their mistakes
because if any product is shipped wrong, then companies should take some
extra efforts to make their customers happier and loyal to them.

3. The Struggle of Competing on Price and Shipping

The merchants of E-Commerce constantly compete over price. It is a

common phenomenon that plenty of sellers on online portal list same number
of products on their websites, but the only difference is seen in the prices of
the products. Merchants constantly try to sell out their products online to
increase their market share.
This competition among the prices of products adversely affects the business
of small E-Commerce enterprises. This happens because the large-sized E-
Commerce merchants are big competitors who offer wide range of products
at a lesser price with free shipping on almost each order. While on the other
hand small merchants are not able to afford the products at less price, due to
which they are not in a market position to offer same discounts on variety of
products.

Solution:

To survive in such a competitive market, E-Commerce companies are

required to distribute their own inventories to fulfill the warehouses. In
addition, these online retailers can find some unique products to minimize this
problem. Because ultimately every online shopper expects fast and free
shipping that too in lowest price

4. Competition Against Retailers and Manufacturers

Many of the emergent online e-store merchants purchase bulk of products

from the wholesale manufacturers or distributors to sell out in market from
their online store. This comprises the basic business model for every online e-
stores in the market.
 In fact, due to barriers in entry in the business of ecommerce and due to
several other constraints, many of the product manufacturers and retailers
have started to sell out their products directly to the consumers. This creates
the competition in the market because the same company that may sell out
your products can turn out to be your best competitor. For an instance, ABC
Garments does not sell out only in online marketplace, but they also distribute
their products directly to consumers on their website. This chain builds up
large number of manufactures that makes the online retail scenario even
worse.
Solution:
Although, it is not possible to stop the manufacturers to distribute their products to
customers directly, but some of the following tactics might help to reduce this chronic
problem.
Some of the remedies that might help the online retailers are listed below:
1. Less priority should be given to those manufacturers who are less likely to sell
out their products directly to customers.
2. Products must be offered at lesser prices along with some added benefit to
increase the number of sales.
3. Manufacturers should mandate strict policies to sell out the product directly to
customer by regulating strict regulations while making the contract. However, it is
not possible for every manufacturer, but one can deal easily with the small
manufacturers.

CHANGING TRENDS OF e-COMMERCE

1. Mobile Applications Are Changing the Relationships Between Consumers
and Retailers.
 Modern mobile Apps provide the retailers with an opportunity to connect
with the worldwide consumers that goes beyond the boundaries of brick-
and-mortar business. With the evolution of such technologies, brands do
not have to wait longer for their customers to walk into their shops or to
spot any kind of advertisements that may prompt them to engage heavily
with the business.
 Nowadays any type of businesses can reach out to consumers anytime
and everywhere. Even when customers are not doing any type of
shopping, etailers are still on their minds. As everybody used to carry their
cellphones with them every time so there is a constant reminder of a
brand’s app on customer’s phone as it acts as a reminder for him or her
that the brand for which they are looking out is right on their phones as an
option. Due to the he location-enabled interactions between customers
and retailers, message is delivered to customers when they enter into the
shops to receive the customer’s feedback either offline or online.
2. Retailers are more on Consumers’ Minds
3. Consumers prefer the convenience of faster delivery and lower prices.
 Sources: munishsingla71/e-commerce-10713485/ Society Publishing Abhishek
Singh, ebscohost.com/ehost/

What is a “Market”?
A market is a place where trading occurs. But does a market have to be a place? No. There are
many types of markets: supermarkets where you can purchase everything from food to flowers,
essential supplies, flea markets where people buy and sell used items, black markets in which
illegal or illegally acquired commodities trade hands, stock markets, meat markets, money
markets and farmers’ markets. In short, there are many different institutions that we identify as a
market. Nevertheless, when many of us think of a market, we tend to think of the organized
financial markets and more explicitly, the trading floors of the securities exchanges.
NASDAQ- North American Securities Dealers Automated Quotation System
An electronic network aimed at getting buyers and sellers together without the use of a specialist
system, broker network, or populated trading floor as is currently employed by the NYSE.
In the realm of equities (or stock), there is a distinction drawn between “listed” as in listed on the
NYSE and “OTC” as in over the counter such as NASDAQ stock.
Where does the terminology OTC come from? Was there ever a counter over which transactions
took place? As with most terminology, this expression likely has its origins grounded in fact.
At one time, individuals engaged in the trading of (paper) security certificates out-of-doors over
tabletops in lower Manhattan; no doubt, inclement weather is only one of the many reasons that
the members of the American Curbside Brokers Association moved in-doors, changed their
name, and established the American Stock Exchange (AMEX), a rival of the NYSE.
Though, there once may have actually been a counter, nowadays OTC simply refers to trading
which is either done over the telephone or done electronically (through an electronic
communication network (ECN) or some other telecommunications or computer-based system.
The foreign exchange market today is almost exclusively done OTC. There are, as is almost
always the case in foreign exchange, exceptions, such as the International Monetary Market
(IMM) currency features and the options written on those futures, which trade at the MERC (the
Chicago Mercantile Exchange), the LIFFE (the London International Monetary Exchange) and
also foreign exchange options which trade on, of all places, the Philadelphia Stock Exchange, but
these contracts constitute only a very, very small part of the volume in foreign exchange.
A market is simply an institution that has, as its goal, brining buyers and sellers together.
The foreign exchange markets are global, primarily over-the-counter, and relatively unregulated
(compared to the securities markets). As FX (forex) trading involves dealing in money and banks
continue to serve as the warehouses of this commodity, these markets tend to be dominated by
the large international money center banks.
What is a “Price”? What is a “price”? Adam Smith once said,
The real price of everything, what everything really costs to the man who wants to acquire it, is
the toil and trouble of acquiring it” – Adam Smith, An Inquiry into the Nature and Causes of the
Wealth of Nations (1776)
While we believe this to be true, this is not usually the way that we think about prices in our
daily life. Ask yourself, “what is the prices of a hamburger. For the sake of argument, let’s say
you respond with, “$4”. That is, you say, “the price of a hamburger is 4 Dollars”
Let’s try to think about prices differently. I believe that it is reasonable to think of the price of a
hamburger as $4, but what this really means is that you will receive 1 hamburger for USD 4.
These two numbers constitute an exchange or a trade. In this sense, this prices (and very price)
can (and should) be thought of as a ration of quantities.
USD 4
1 hamburger
A Price is a Ratio of Quantities

More precisely, what this indicates is that if you give up four USD, you will receive one
hamburger. Though it may sound odd when articulated in this way, when we are buying
hamburgers, we are selling Dollars, and the price identifies the rate of exchange. And though it
may sound even stranger, McDonald’s buys Dollars with hamburgers, though almost everyone
would identify McDonald’s typical daily activity as selling hamburgers.

Every time you buy one thing, you sell another thing (nothing explicitly that this refers to one
transaction, not two) and every time you sell something, you necessarily buy something else in
exchange.

Buyers and Sellers

Let’s take a look on this question. For the sake of argument, assume you own a car, you may as
well assume that you own an extremely nice car. Now, the question is, “Would you like to buy
another car just like yours? Some of us may think that we do not “need” another car, but if I
asked you whether you’d like to buy another car just like yours for USD 1, most people would
immediately respond in the affirmative. If asked, “Would you be willing to sell your car?” some
people might respond, “no” because they “need” their car, for example, to get to work, but, by
the time I started offering USD 20,000,000, most people would tend to oblige.
What is the point? Economists often talk about “the buyers” and “the sellers” as if they are well-
defined groups of economic agents, but whether you are a buyer or a seller may very well depend
on the price. Prices drive markets. This is no less true of the foreign exchange market than any
other market, and, remember, it is best, especially in FX, to think of very price as a ratio of
quantities.
Market Making
Most people say that the market went up because there were more buyers than sellers, but that
need not to be strictly true. One seller with a great deal of product to sell or “to go” may interface
with a huge number of buyers, but the numerical superiority of the quantity of buyers may not be
sufficient to keep the market price from plummeting as the seller goes about his/her business.
Price behavior depends on the quantity being offered for the sale, the quantity for which buyers
are bidding, the time frame involved, the urgency of the two sides of the market. In return, for
providing this liquidity to the market (and assuming the risks that such activities entail), the
marketmaker is compensated by having the opportunity to buy low (quoting a low buying price
or bid price or simply “bid” and to sell or offer high (charging a higher selling price or offer
price, or asking price, or simply “offer” or “ask”).
This bid-ask (0r bid-offer) spread is one way that a marketmaker attempts to generate a profit
and stay in business. The very best thing that could happen to a market make is to experience a
great deal of “two-sided flow” with, from the marketer’s perspective, lots of buying on the bid
and lots of selling at the offer. Being a marketer does not necessarily involve arbitrage or a
certain profit, though, as an upward trending market may find a marketmaker selling throughout
the day with no arbitrage profit to show for it on the close.
The Rule of the marketmaker is, buy low. Sell high.

Reference:
Reference: Tim Weithers (2006)

TRADING MONEY

Introduction
When many of us think of foreign exchange, what comes to mind are those little booths in the
airport malls at which we can exchange, say, the US dollars for British Pounds Sterling when our
way to or from a vacation or business trip. Indeed, in some ways, there is nothing more
complicated about the market to foreign exchange than that; it is all about buying and selling
money.
But there are two things to note up front about foreign exchange that make it appear a bit
daunting. First, the realm of foreign exchange is rife with incomprehensible slang, confusing
jargon a real challenge. Banks and other financial institutions can’t even agree as to what this
business area should be called: FX, Currencies, Treasury Products, ForEx or Forex, Bank Notes,
Exchange Rates. Second, and more fundamentally, what constitutes “foreign” depends upon
where you consider “home” (example: whether you are from the U.S or the U.K).

The Roles Money Plays

Economists ascribe three functions (or roles) to money. It serves as
1. A medium of exchange
2. A unit of account
3. A store of value

RISK MANAGEMENT

Introduction:
This module is intended for all who want to learn the introduction to the theory and application
of risk management. It sets out an integrated introduction to the management of risk in public
and private organizations. This might also help you to gain a better understanding of risk and
risk management and thereby fulfil the primary responsibilities of your jobs with an enhanced
understanding of risk.

Approaches to Defining Risk

Definition of Risk

The Oxford English Dictionary definition of risk is as follows:

A chance or possibility of danger, loss, injury or other adverse consequences, and the definition
of at risk is “exposed to danger”.

In this context, risk is used to signify negative consequences. However, taking a risk can also
result in a positive outcome. A third possibility is that risk is related to uncertainty of outcome.

Take a Look on this example:

For most people, owning a car is an opportunity to become more mobile and gain related
benefits. However, there are uncertainties in owning a car that are related to maintenance and
repair costs. Finally motor cars can be involved in accidents, so there are obvious negative
outcomes that can occur. It is also important to remember the legal obligations associated with
car ownership and the rules that must be obeyed when the car is being driven on the road.

The Institute of Risk Management (IRM) defines risk as the combination of the probability of an
event and its consequence. Consequences can range from positive to negative. This is widely
applicable and practical definition that can be easily applied.

Types of Risks

Risk may have positive or negative outcomes or may simply result in uncertainty. Therefore,
risks may be considered to be related to an opportunity or a loss or the presence of uncertainty
for an organization. Every risk has its own characteristics that require particular management or
analysis.

Risks are divided into four categories:

 Compliance (or mandatory) risks
 Hazard (or pure) risks
 Control (or uncertainty) risks
 Opportunity (or speculative) risks

In general terms, organizations will seek to minimize compliance risks, mitigate hazard risks,
manage control risks and embrace opportunity risks. However, it is important to note that there
is no “right” or “wrong” subdivision of risks.

Hazard Risks/ Pure Risks

 There are certain risk events that can only result in negative outcomes. These may be
thought of as operational or insurable risks. In general, organizations will have a
tolerance of hazard risks, and these need to be managed within the levels that the
organization can tolerate.

A good example of a hazard risk faced by many organizations is that of theft.

Control Risks/ Uncertainty Risks

 Risks that give rise to uncertainty about the outcome of a situation. Control risks and are
frequently associated with project management. In general, organizations will have an
aversion to control risks.
 Example of this can be associated with the benefits that the project produces, as well as
uncertainty about the delivery of the project on time, within budget and to
specification.

The management of control risks will often be undertaken in order to ensure that the outcome
from the business activities fall within the desired range. The purpose is to reduce the variance
between anticipated outcomes and actual results.

Opportunity/ Speculative Risks

 Organizations deliberately take risks specially marketplace or commercial risks in order
to achieve positive return. An organization will have a specific appetite for investment in
such risk.
 This risk relates to the relationship between risk and return. The purpose is to take
action that involves risk to achieve positive gains.
 The focus of this risk will be towards investment.

IMPACT OF RISK ON ORGANIZATIONS

Level of Risk

Following the events in the world financial system during 2008, all organizations are taking a
greater interest in risk and risk management. It is increasingly understood that the explicit and
structured management of risks bring benefits. By taking a proactive approach to risk and risk
management, organizations will be able to achieve the following four areas of improvement:
a. Strategy
 Because the risks associated with different strategic options will be fully analyzed
and better strategic decisions will be reached.
b. Tactics
 Consideration will have been given to selection of the tactics and the risks
involved in the alternatives that may be available.

c. Operations
 Events that can cause disruption will be identified in advance and actions take to
reduce the likelihood of these events occurring, limit the damage caused by
these events and contain the costs of the events.
d. Compliance
 This will be enhanced because the risks associated with failure to achieve
compliance with statutory and customer obligations will be recognized.

It is no longer acceptable for organizations to find themselves in a position whereby unexpected

events cause financial loss, disruption to normal operations, damage to reputation and loss of
market presence. Stakeholders now expect that organizations will take full account of the risks
that may cause disruption within operations, late delivery of projects or failure to deliver
strategy.
The term “magnitude” is used to indicate the size of the event that has occurred or might
occur. The term “impact” is used to define how the event affects the finances, infrastructure,
reputation and or marketplace (FIRM) of the organization. This use of terminology is also
consistent with the use of impact in business continuity planning evaluations. This is a measure
of the risk at the current level. The term “consequences” is used to indicate the extent to which
the event results in failure to achieve effective and efficient strategy, tactics, operations and
compliance (STOC).

IMPACT OF HAZARD RISKS

Hazard risks undermine objectives, and the level of impact such risks is a measure of their
significance. Risk management has its longest history and earliest origins in the management of
hazard risks. Hazard risk management is closely related to the management of insurable risks.
Remember that a hazard (or pure) risk can only have a negative outcome.

Hazard risk management is concerned with issues such as health and safety at work, fire
prevention, avoiding damage to property and the consequences of defective products. This can
cause disruption to normal operations as well as resulting in increased costs and poor publicity
associated with disruptive events.

RISK AND REWARD

Another feature of risk and risk management is that many risks are taken by organizations in
order to achieve reward. A business will launch a new product because it believes that greater
profit is available from the successful marketing of the product. In launching a new product, the
organization will put resources at risk because it has decided that a certain amount of risk
taking is appropriate. The value at risk represents the risk appetite of the organization with
respect to the activity that it is undertaking.

When an organization puts value at risk in this way, it should do so with full knowledge of the
risk exposure and it should be satisfied that the risk exposure is within the appetite of the
organization. Even more important, it should ensure that, it has sufficient resources to cover
the risk exposure. In other words, the risk exposure and the should be quantified, the appetite
to take the level of risk should be adverse consequences should be clearly established.

ATTITUDES OF RISK

Different organizations will have different attitudes to risk. Some organizations may be
considered to be risk averse, whilst others will be risk aggressive. To some extent, the attitude
of the organization to risk will depend on the sector and the nature and maturity of the
marketplace within which it operates, as well as the attitude of the individual board members.

RISKS & TRIGGERS

Risk sometimes defined as uncertainty of outcomes. This is somewhat technical, but

nevertheless useful, definition and it is particularly applicable to the management of control
risks.
Control risk are the most difficult to identify and define, but are often associated with projects.
The overall intention of a project is to deliver the desired outcomes on time, within budget and
to specification, quality or performance.
Example:

When a building is constructed, the nature of the ground conditions may not always be known
in detail. As the construction work proceeds, more information will be available about the
nature of the conditions. This information may be positive news that the ground is stronger
than expected and less foundation work is required. Alternatively, it may be discovered that the
ground is contaminated or is weaker than expected or that there are other potentially adverse
circumstances, such as archaeological remains being discovered.

Categories of Operational Disruption

Category Examples of Disruption

People Lack of people skills and or resources
Inappropriate behavior by a senior manager
Unexpected absence of key personnel
Ill-health, accident or injury to people
Premises Inadequate insufficient or denial of access to premises
Damage to or contamination of premises
Damage to and breakdown of physical assets
Theft or loss of physical assets
Processes Failure of IT hardware or software systems
Disruption by hacker or computer virus
Inadequate management of information
Failure of communication or transport systems
Products Poor product or service quality
Disruption caused by failure of supplier
Delivery of defective goods or components
Failure of outsourced services and facilities

Definitions of Risk Management

Organization Definition of Risk Management

ISO Guide 73 BS 31100 Co-ordinated activities to direct and control an organization
with regard to risk.
Institute of Risk Management Process which aims to help organizations understand,
(IRM) evaluate and take action on all their risks with a view to
increase the probability of success and reducing the
likelihood of failure.
HM Treasury All the processes involved in identifying, assessing and
judging risks, assigning ownership, taking actions to
mitigate or anticipate them, and monitoring and reviewing
progress.
London School of Economics Selection of those risks a business should take and those
which should be avoided or mitigated, followed by action to
avoid or reduce risks.

Reference: Fundamentals of Risk Management 5th edition (Paul Hopkin)