Legal risks are related to compliance risks, but they extend further than violating a law. It includes any legal exposure that arises in business. Some examples of common legal risks include:
Contractual risks – when an organization enters into a contract, they are exposing themselves to risks. Legal risk arises if a party to the contract fails to fulfil their obligations resulting in breach of contract with the potential for legal accountability or litigation.
Public liability risks – these can occur if, for example, a customer slips and falls, injuring themselves on your premises and decides to commence legal proceedings against you for damages.
Regulatory risks – these are related to compliance risk and can occur, for example, if a regulator withdraws, suspends or cancels a licence the organization needs to operate in a particular industry leading to cessation of operations.
Risk of disputes – these are the result of handling disputes with customers, clients, stakeholders and members of the community. These can lead to litigation and harm to the reputation of you organization.