The risk of loss due to legal action taken by a third party(ies) to seek financial or other compensation from the organization for some contractual breach or other obligation(s) that the party(ies) believes exists or is in existence. The parties can include shareholders, business partners, management, employees, customers, suppliers, competitors or government bodies.

The risk of loss can be due to action taken by the organization or action alleged to have been taken (or not taken) by the organization.