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What is Regulatory Risk?

 , November 24, 2015 updated on March 21, 2021
Regulatory risk is the potential for losses due to a change in laws and regulations. There are several major types of regulatory risk:

1. Compliance

Compliance to new laws and regulation can be a significant expense that may include the cost of changing products, processes and legal structures. The burden of compliance can be greater for small businesses with limited resources. In some cases, compliance can also be a significant expense for large multinational companies that must comply with laws in a number of countries that are perpetually in flux.

2. Investment Risk

New laws and regulations can greatly impact the value of assets and securities such as stocks. For example, a business that is facing high compliance costs may see its stock price fall.
Overview: Regulatory Risk
DefinitionA potential for losses due to unanticipated changes to laws and regulations.
Risk TreatmentsAvoid
Related ConceptsCompliance Risk
Legal Risk


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