Legal risks refer to the potential for financial loss or legal consequences that arise from non-compliance with laws and regulations. These risks can affect individuals, businesses, and organizations, leading to lawsuits, fines, or reputational damage. Understanding and managing legal risks is essential for maintaining compliance and protecting assets. Common sources of legal risks include contracts, employment practices, and regulatory requirements. For example, failing to adhere to labor laws can result in penalties, while poorly drafted contracts may lead to disputes. Proactively identifying and addressing these risks can help mitigate their impact and ensure smoother operations.