Although, legal risk and compliance are closely related, they aren’t the same. “Legal risk” is the risk of legal exposure or harm; whereas, “compliance” is the controls and processes utilized to avoid that exposure.

The purpose of legal risk and compliance is to help an organization stay within the law, avoid disputes and penalties, and protect its finances, reputation and business continuity. It aids in avoiding fines, lawsuits, reputational damage and operational disruption while supporting better decision-making and long-term growth.

In the context of application in corporate business, legal risk and compliance are, usually, managed together because weak compliance often creates legal exposure. While, good compliance aids in reducing the chance of disputes, regulatory action and financial loss, thereby making many organizations treat them as part of a broader risk management.

To sum it up, legal risk and compliance preserve legality, protect value, and make sustainable growth possible.