Legal risk

Legal risk
Legal risk can be split into four areas:
Ω The risk of suffering legal claims due to product liability or employee actions
Ω The risk that a legal opinion on a matter of law turns out to be incorrect in a court
of law. This latter risk is applicable to netting or new products such as credit
derivatives where the enforceability of the agreements may not be proven in
particular countries
Ω Where the legal agreement covering the transaction is so complicated that the
cash flows cannot be incorporated into the accounting or settlement systems of
the company
Ω Ability to enforce the decision in one jurisdiction in a different jurisdiction.