From inventory to payroll to marketing strategy, there are many facets to running a business. Though it may feel impossible to pinpoint the most critical responsibility on your never-ending list of to-dos, risk management planning deserves a spot at the top.
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Risk management involves identifying potential risks and developing strategies to both address and minimise their effects. In the business world, risks can be categorised as any event that may create a negative impact on your organisation, such as fraudulent transactions, phishing, and more. By implementing the proper protections and measures, businesses can help reduce their likelihood and/or impact.
Without mitigating risks, businesses of all sizes are in danger of suffering serious, far-reaching consequences, from financial and data losses to decreased consumer trust and loyalty. Even worse, if you receive a fraudulent payment, you could be held financially responsible for the loss.
Though instances of fraud continue to grow rapidly, there are emerging tools, data-driven protocols, and adaptive risk management solutions that can help prevent risks, protect your business and buyers, and create a positive, trustworthy customer experience from search to checkout.
Before we discuss how to identify, minimise, and prevent payment fraud risks, it’s helpful to understand common risk types that may affect your business, including phishing, chargebacks, and reversals.
Credit card fraud involves using an unauthorised credit card or credit card information to make a purchase. This can occur both when a fraudster steals a physical credit card or simply obtains the card information via phishing or data breach. On a positive note, there are proven ways you can reduce the chances of credit card fraud, including signature, billing, and photo ID verification.
What are phishing scams and spoofing attempts? On a basic level, phishing or spoofing is when a scammer impersonates or disguises themselves as a reputable brand. Think of it as an attempt to gain access to your sensitive data via fake emails, websites, text messages, or voicemails.
What is a chargeback? As the name suggests, a chargeback is a transaction reversal. It occurs when a customer contacts their debit or credit issuer and requests a refund after a completed transaction.
What is a payment reversal? Similar to a chargeback, a payment reversal (sometimes called a bank reversal) arises when a request is made for a merchant to reverse a transaction and return the funds back to the method of payment. This request may come from the customer or the bank and is usually filed because of suspected unauthorised use of a bank account.
As a business owner, it’s important to not only be aware of the potential for fraud but also take steps to prevent and mitigate risk. In the online payments world, red flags to watch for include unusual or large orders, mismatched billing and shipping addresses, and suspicious email addresses.
Staying vigilant and taking preventive measures can help protect your business. The following are common signs of unusual or scammer activity that may suggest fraud and indicate you should investigate further:
While fraud may feel inevitable to businesses, there are steps you can take to minimise the risk in your operation.
PayPal’s advanced Fraud Protection technology and Seller Protection on eligible transactions can help businesses guard against fraud and other scams like phishing and identity theft.
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