Legal Risk Vs Other Risk
Legal risk is more dangerous than any other risk like liquidity, solvency , interest or equity risk because in legal risk your business may be stopped by court or it can be banned in specific country. If any company starts illegal works, at that time, company can face many problems and legal risk is one of them. the company
as well as the persons responsible for the conduct of its affairs are liable to be punished for any
offence committed by a company.
Types of Legal Risk
Generally a company is exposed to the following kinds of legal risk:
- Product liability risk
To repayment or remedy for providing bad quality products to customers.
- Employee liability risk
To provide compensation in case any accident happen in company’s factory
- Compliance default risk
To accept the legal responsibility
- Tax compliance risk
To accept tax and tax penalty
- Environmental risk
To accept loss of penalty due to affect environment.
Legal Risk Management
Legal risk management is technique to reduce legal risk. Company should appoint legal experts for managing the legal risk. He can suggest using different law like FEMA 2000, FTDR Act 1992, IT Act 2000, Competition Act 2002 , MRTP Act 1969 and many other laws according to new amendments by government of India, RBI, Indian high and Supreme Court. Company can control his risk by paying small amount of insurance premium. This system is called risk transfer. One more way to reduce the legal risk is only to do all work legally or etymologically. Company should never accept any risky propositions and should shun from all illegal works.