ERM Glossary: Legal risk

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Legal risk is often viewed as having 3 elements:

Legislative risk

Risks involved in failing to adhere to legislation/regulation, including risks relating to changes in accepted interpretations

Contractual risk

Risks contained in contracts, particularly ones involving disputes in interpreting contracts

Litigation risk

Risks involving court judgements that give rise to unexpected outcomes or unanticipated interpretations of legislation or contracts. These may include litigation between unrelated third parties that create precedents that may apply to the entity in question.

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