Litigation Risk

AAA

DEFINITION of 'Litigation Risk'

The possibility that legal action will be taken because of an individual's or corporation's actions, inactions, products, services or other events. Corporations generally employ some type of litigation risk analysis and management to identify key areas where the litigation risk is high, and thereby take appropriate measures to limit or eliminate those risks.

BREAKING DOWN 'Litigation Risk'

Litigation risk can be regarded as an individual's or corporation's likelihood of getting taken to court. In a litigious society, all members are at some risk of litigation. Large firms with deep pockets can be especially prone to litigation risk since the rewards for any plaintiffs can be considerable. Corporations typically have measures in place to identify and reduce risks, such as ensuring product safety and following all pertinent laws and regulations.

RELATED TERMS
  1. Default Judgment

    A binding judgment issued by a court in favor of the plaintiff ...
  2. Compensatory Damages

    Money awarded to a plaintiff to compensate for damages, injury, ...
  3. External Claim

    A claim against an individual that does not arise out of any ...
  4. Punitive Damages

    Legal recompense that is levied as punishment for a wrong or ...
  5. Class Action

    An action where an individual represents a group in a court claim. ...
  6. Corporate Social Responsibility

    Corporate initiative to assess and take responsibility for the ...
Related Articles
  1. Insurance

    Are You Trying To Get Sued?!

    Organizational lawsuits are commonplace these days. Knowing how to react to and (more importantly) prevent them can save your business.
  2. Personal Finance

    Litigation: Are Your Investments At Risk?

    Don't let company lawsuits hit you unprepared. Learn how to uncover how they might affect you.
  3. Bonds & Fixed Income

    Conglomerates: Risky Proposition?

    Investing in a corporate giant may not be as safe as you think.
  4. Options & Futures

    So, You Want To Take Your Broker To Court

    Find out how to file a claim with your broker and what you can expect throughout the process.
  5. Economics

    Explaining the Balanced Scorecard

    A balanced scorecard is a metric that measures a business’ performance.
  6. Investing Basics

    What is a Public Company?

    A public company has sold stock to the public through an initial public offering (IPO) and that stock is currently traded on a public stock exchange.
  7. Economics

    What Does Human Resources Do?

    Human resources (HR) is the department within a company that handles all matters relating to employment.
  8. Professionals

    8 Justifications For Sky-high CEO Salaries

    Why are CEO salaries so astronomically high? There may be more to the story than you think.
  9. Term

    What is a Feasibility Study?

    A feasibility study analyzes a company’s ability to complete a project.
  10. Stock Analysis

    Drugmaker Extraordinaire: How Eli Lilly Grows

    Drugs mean big profits in America. Here's how the country's oldest pharmaceutical firm keeps its toehold in the market.
RELATED FAQS
  1. How do modern companies assess business risk?

    Before a business can assess or mitigate business risk, it must first identify probable or likely risks to its bottom line. ... Read Full Answer >>
  2. Why has emphasis on corporate governance grown in the 21st century?

    Corporate governance refers to operational practices, management protocols, and other governing rules or principles by which ... Read Full Answer >>
  3. What impact did the Sarbanes-Oxley Act have on corporate governance in the United ...

    After a prolonged period of corporate scandals involving large public companies from 2000 to 2002, the Sarbanes-Oxley Act ... Read Full Answer >>
  4. Why should investors research the C-suite executives of a company?

    C-suite executives are essential for creating and enacting overall firm strategy and are therefore an important aspect of ... Read Full Answer >>
  5. What is the difference between a direct and an indirect distribution channel?

    A direct distribution channel is organized and managed by the firm itself. An indirect distribution channel relies on intermediaries ... Read Full Answer >>
  6. How can an investor determine a company's annual return from looking at its financial ...

    The funds in a share premium account cannot be used for a company's general expenses. These funds are restricted in terms ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Bear Market

    A market condition in which the prices of securities are falling, and widespread pessimism causes the negative sentiment ...
  2. Alligator Spread

    An unprofitable spread that occurs as a result of large commissions charged on the transaction, regardless of favorable market ...
  3. Tiger Cub Economies

    The four Southeast Asian economies of Indonesia, Malaysia, the Philippines and Thailand. Tiger cub economy indicates that ...
  4. Gorilla

    A company that dominates an industry without having a complete monopoly. A gorilla firm has large control of the pricing ...
  5. Elephants

    Slang for large institutions that have the funds to make high volumes trades. Due to the large volumes of stock that elephants ...
  6. Widow's Exemption

    In general terms, a widow's exemption refers to the amount that can be deducted from taxable income by a widow, thereby reducing ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!