For instance, there are specific sets of legal risks that are defined by European Union (EU) Law.
This process won't prevent each lawsuit or administrative punishment, however, it can reduce lawful risks and enhance the organization's responses.
McCormick, R. 2004 Legal risk is the risk of loss to an institution which is primarily caused by:(a) a defective transaction; or(b) a claim (including a defense to a claim or a counterclaim) being made or some other event occurring which results in a liability for the institution or other loss (for example, as a result of the termination of a contract) or;(c) failing to take appropriate measures to protect assets (for example, intellectual property) owned by the institution; or(d) change in law.
[8] Legal risk is the risk of financial or reputational loss that can result from lack of awareness or misunderstanding of, ambiguity in, or reckless indifference to, the way law and regulation apply to your business, its relationships, processes, products and services.
Legal risk can lead to fines and administrative penalties, the need for monetary damages, deterioration of reputation, deterioration of the bank's market position, narrowing opportunities for development, reducing the opportunities for development or legal enforcement of agreements.