From the course: Introduction to Risk Management

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Compliance risk

Compliance risk

From the course: Introduction to Risk Management

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Compliance risk

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- [Narrator] Compliance risk is the risk that a bank incurs fines, has restrictions on it from doing business, or has damage to its reputation from not following or by breaking the laws and regulations in the countries where it does business. Compliance risk has a couple of important and closely related types of risks, which are important to define as it's easy to get confused about them. One subset of compliance risk is legal risk. Legal risk is the risk of potential legal actions being taken against the bank. Often, legal risk manifests itself as lawsuits against the bank. On the other hand, regulatory risk is the risk that a new regulation or law will be implemented. Either increasing compliance costs for a bank or causing disruptions to their day-to-day business. Banks will often group legal and regulatory risks, and manage them together with compliance risks.

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