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Legal risk management refers to the process of evaluating alternative regulatory and non-regulatory responses to risk and selecting among them. Even with the legal realm, this process requires knowledge of the legal, economic and social factors, as well as knowledge of the business world in which legal teams operate. [4]
Example of risk assessment: A NASA model showing areas at high risk from impact for the International Space Station. Risk management is the identification, evaluation, and prioritization of risks, [1] followed by the minimization, monitoring, and control of the impact or probability of those risks occurring. [2]
Legal risk is the risk of loss to an institution which is primarily caused by: (a) a defective transaction; or (b) a claim (including a defense to a claim or a counterclaim) being made or some other event occurring which results in a liability for the institution or other loss (for example, as a result of the termination of a contract) or;
Governance activities ensure that critical management information reaching the executive team is sufficiently complete, accurate and timely to enable appropriate management decision making, and provide the control mechanisms to ensure that strategies, directions and instructions from management are carried out systematically and effectively.
A risk management plan is a document to foresee risks, estimate impacts, and define responses to risks. It also contains a risk assessment matrix.According to the Project Management Institute, a risk management plan is a "component of the project, program, or portfolio management plan that describes how risk management activities will be structured and performed".
The International Organization for Standardization (ISO) and its ISO 37301:2021 (which deprecates ISO 19600:2014) standard is one of the primary international standards for how businesses handle regulatory compliance, providing a reminder of how compliance and risk should operate together, as "colleagues" sharing a common framework with some nuances to account for their differences.
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Regulatory risk differentiation is also referred to as the Compliance Model in some regulatory agencies. [1] See for example the Australian Prudential Regulatory Authority risk differentiation approach known as: PAIRS [2] / SOARS. [3] PAIRS is the Probability And Impact Rating System, while SOARS is the Supervisory Oversight And Response System.