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Basle II classified Legal risk as a subset of Operational Risk in 2003. There is no standard definition, but there are at least two primary/secondary definition sets in circulation.
Mcormick, R. 2004 Legal risk is the risk of loss to an institution which is primarily caused by:- (a) a defective transaction; or (b) a claim (including a defense to a claim or a counterclaim) being made or some other event occurring which results in a liability for the institution or other loss (for example, as a result of the termination of a contract) or; (c) failing to take appropriate measures to protect assets (for example, intellectual property) owned by the institution; or (d) change in law.
Johnson and Swanson. 2007 The expenses of litigation of a company. 
Whalley, M. 2012 The risk of financial or reputational loss arising from: regulatory or legal action; disputes for or against the company; failure to correctly document, enforce or adhere to contractual arrangements; inadequate management of non-contractual rights; or failure to meet non-contractual obligations.
Tsui TC. 2013 The cost and lose of income caused by legal uncertainty, multiplied by possibility of the individual event or legal environment as a whole.
All definitions contain more detail.
- Roger McCormick. "Legal Risk in the Financial Markets", Oxford University Press
- Kevin Johnson and Zane Swanson "Legal Risk in the Financial Markets" Management Accounting Quarterly, Full 2007 at: http://www.imanet.org/resources_and_publications/management_accounting_quarterly/issues/Fall_2007.aspx
- Tat Chee Tsui. "Experience from the Anti-Monopoly Law Decision in China (Cost and Benefit of Rule of Law)." The Network: Business at Berkeley Law (Apr/ May 2013) at: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2260965
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