Legal Risk vs Compliance Risk- A Critical Analysis
|
Parameters |
Legal Risk |
Compliance Risk |
|---|---|---|
|
Meaning |
Legal Risk means taking legal potential actions against a company. | Compliance Risk results in material loss and financial forfeiture. |
|
Scope |
The scope is not limited with wide range of potential legal difficulties that an organization may encounter. | It focuses mostly on how well the company complies with internal policies, industry standards and legal requirements. |
|
Approach |
It requires proactive approach which identifies and addresses potential legal issues. | It involves both, proactive and reactive approach. |
|
Consequences |
The consequences include financial losses, reputational damage and the need to engage in legal proceedings. | The consequences include regulatory fines, legal actions and reputational harm. |
|
Timeframe |
It is not tied with specific timeframe. | It has a specific set timeframe. |
Legal Risk in Business: Meaning, Types and FAQs
Legal Risk is the possibility of suffering monetary loss, harm to one’s reputation, or other unfavorable outcomes as a result of the unknowns and difficulties posed by legal considerations for an organization or an individual. It includes the potential for legal action, modifications to regulations, breaking laws and rules, disagreements over contracts, and other legal matters that could affect how a corporation conducts business.
Geeky Takeaways:
- Laws and Regulations: Modifications to national or international laws and regulations may give rise to legal concerns. If laws are broken or new requirements are not followed, there could be legal consequences.
- Contractual Commitments: Legal issues may arise from failure to fulfill contractual commitments or disagreements on the terms of the contract. This covers disagreements over interpretation, performance-related problems, and contract violations.
- Litigation and Legal Actions: Court cases, whether brought by or against the organization, may have unfavorable effects on the economy or other aspects of life. This could involve filing a criminal complaint, filing a civil suit, or both.
- Intellectual Property Issues: Violating against someone else’s patent, trademark or copyright can result in legal problems as well as monetary penalties.
- Compliance Risks: An organization may be subject to legal consequences if it disregards internal policies, ethical norms, or industry standards. This covers matters about environmental rules, anti-corruption initiatives, and data protection.
Table of Content
- What is a Legal Risk in Business?
- Types of Legal Risks
- Benefits of Legal Risk Management
- Legal Risk vs Compliance Risk- A Critical Analysis
- Conclusion
- Legal Risk in Business – FAQs