Legal risk refers to the potential for financial loss or damage to a business due to legal actions or non-compliance with laws and regulations. This can arise from various sources, including contracts, employment practices, and regulatory requirements. Companies must be aware of these risks to avoid costly litigation or penalties. To manage legal risk, organizations often implement compliance programs and seek legal advice. This proactive approach helps identify potential issues before they escalate. By understanding the legal landscape, businesses can better protect themselves from unexpected legal challenges and maintain their reputation in the market.