Contractual risk refers to the potential for loss or negative consequences that arise from the terms and conditions of a contract. This risk can occur if one party fails to fulfill their obligations, leading to disputes, financial losses, or legal issues. Understanding the specific terms of a contract is essential to mitigate these risks. To manage contractual risk, parties often engage in thorough contract review and negotiation. This process may involve clarifying responsibilities, setting clear deadlines, and including provisions for dispute resolution. By addressing these elements, parties can reduce the likelihood of misunderstandings and protect their interests in the agreement.