The assessment of risks related to the regulatory environment is known as what?

The assessment of risks related to the regulatory environment is specifically termed regulatory risk. This type of risk arises from changes in laws and regulations that could potentially affect an organization’s operations, profitability, and overall strategy. Regulatory risk encompasses various aspects, including the possibility of non-compliance with regulations that can result in penalties, legal expenses, and reputational damage.

Understanding regulatory risk is essential for organizations as it helps them navigate the complexities of compliance with existing regulations and anticipate future regulatory changes. This proactive approach allows firms to establish appropriate controls, allocate resources effectively, and adapt their business practices accordingly to mitigate potential adverse impacts.

While other types of risk, such as legal risk or compliance risk, may touch on similar themes, they do not encapsulate the broad scope of regulatory risk which includes the evolving nature of laws and policies governing various industries. Legal risk pertains specifically to the possibility of legal actions arising from disputes or claims, and compliance risk refers narrowly to the risk of failing to adhere to regulations. Operational risk, on the other hand, relates to failures in internal processes, systems, or external events, which is a different facet of risk management altogether.