Litigation Risk


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.

  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. Employee Stock Option - ESO

    A stock option granted to specified employees of a company. ESOs ...
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. Personal Finance

    Top Factors Preventing Workers From Being Promoted

    Many employees blame office politics when they fail to get promoted, but they may be sabotaging their own careers with these behaviors.
  6. Professionals

    Career Advice: Investment Banking Vs. Corporate Finance

    Read an in-depth review and comparison of a career in investment banking and a career in corporate finance, with advice about which one to choose.
  7. Entrepreneurship

    START-UP NY: How a Tax-Free Zone Would Work

    START-UP NY is an initiative designed to attract companies to New York State by giving them 10 years of tax breaks. Sounds good, but is it a success?
  8. Economics

    Explaining Silo Mentality

    A silo mentality occurs when certain departments in an organization do not share information or knowledge with other departments.
  9. Investing

    Measuring Job Satisfaction in the Millennial Age?

    Generation Y embodies the trend towards meshing office life with play, and is creating a new and unique work/life balance.
  10. Investing News

    A CEO as U.S. President: What's the Disconnect?

    Can business leaders effectively lead the country's highest office? Next year may mark the first time that we'll find out.
  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. Capitalization Rate

    The rate of return on a real estate investment property based on the income that the property is expected to generate.
  2. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
  3. Revenue

    The amount of money that a company actually receives during a specific period, including discounts and deductions for returned ...
  4. Normal Profit

    An economic condition occurring when the difference between a firm’s total revenue and total cost is equal to zero.
  5. Operating Cost

    Expenses associated with the maintenance and administration of a business on a day-to-day basis.
  6. Cost Of Funds

    The interest rate paid by financial institutions for the funds that they deploy in their business. The cost of funds is one ...
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!