of the institution, and primarily caused by the lack of proper communication channel, undefined institutional objectives (such as the lack of policies and regulations), unclarified information flow between different personnel and department, lack of delegation of power to specify task on mitigation of risks. Johnson & Swanson. 2007 The expenses of litigation of a company. Whalley, M. 2016 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. Tsui TC. 2013 The cost and loss of income caused by legal uncertainty, multiplied by possibility of the individual event or legal environment as a whole. One of the most obvious legal risks of doing business not mentioned in the above definitions is the risk of arrest and prosecution. Types Regulatory Risks turning into legal risks: These are the risks that arise out of regulations and laws that govern a business organization or the market in which it operates. Every country and the government lays down certain laws and regulations for the proper operations of the businesses. And all the businesses have to comply with those rules and regulations of the land. Moreover, any non-compliance can have serious consequences for any organization. Therefore legal expenses insurance may be used to mitigate this risk. Compliance Risk: The potential for fines and penalties for an organization that fails to comply with laws regulations. Contract Risk: The potential for a partner, customer or supplier to fail to meet the terms of a contract resulting in losses. Contract risk can also result from the failure to meet the terms of a contract resulting in penalties or legal disputes. Non-contractual Rights: The potential for a third party to infringe on its non-contractual obligations. Dispute Risk: The potential for a legal dispute to arise as a result of business activities. Reputational risk: The potential of the decline of reputation due to legal actions. Consequences 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. References Financial risk Operational risk Law by forum Financial law