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It
is the risk of getting negative public opinion, which will expose the
institution to litigation, financial loss, or a decline in customer base. It is
due to not working the expectation of the customers, system deficiencies,
security breach and inadequate information to the customers. In order to avoid
this kind of risk bank should have certain facilities such as backup
facilities, deploying virus checking etc.

 

Legal
Risk

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It
arises from violation of laws, rules, regulations or prescribed practices. Other
reasons for legal risks are uncertainty about the validity of some agreements
formed via electronic media and law regarding customer disclosures and the
privacy protection. In enhancing customer service, bank may link their internet
site to other site too. This may cause legal risk.  

Money
Laundering Risk

Being
internet transactions are done remotely, banks may find it difficult to apply
traditional method for detecting and preventing undesirable criminal
activities. In order to avoid banks, need to design proper customer
identification and techniques.

Cross-
border Risk

Internet
banking is based on technology and it reduces the geographic distance to the
customer and bank. Internet makes possible to do transactions anywhere from the
world. Thus it includes legal and regulatory risks. Because uncertainty about
legal requirements of other countries. 
Cross-border transactions increase credit risk. Banks accepting foreign
currencies in payment for electronic money may be subjected to market risk
because of movements in foreign exchange rates.

Strategic
Risk

It
is associated with the introduction of new product or services. Hence banks
before introducing new mode of services need to conduct proper survey, consult experts’
opinion, study the situation and establish achievable goals and monitor
performance. Also need to analyse the cost of new technology. 

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