Legal risk

The risk of loss because a party to a contract will not be able to enforce security arrangements, enforce foreign judgments, have a choice of law, or refer disputes to arbitration.
In the field of securities trading, the risk that a party will suffer a loss because laws or regulations do not support the rules of the securities settlement system, the performance of related settlement arrangements, or the property rights and other interests held through the settlement system.
In the context of financial risk management the risk that a counterparty is not legally able to enter into a contract.Regulatory risk, i.e. the risk that a transaction could conflict with a regulator´s policy or, more generally, that legislation might change during the life of a financial contract.