Legislative risk is the risk that states, federal and/or local governments may pass laws, regulations, or other policies which could have an adverse impact on a business or individual. This risk can stem from any number of sources, including changes in tax policy, laws pertaining to labor and employment, safety regulations, and environmental laws. Legislative risk is a very real one for businesses – particularly those in the public sector – as government bodies may introduce laws, regulations, or other policies which could negatively impact their operations or profitability.

For private businesses, legislative risk can range from the adoption of new taxes, unfavorable labor policies, or new environmental regulations that may limit their ability to operate effectively. As governments are often driven by public opinion and/or political agendas, businesses need to stay abreast of all legislative changes which may affect them directly or indirectly. Proper monitoring of legislative processes can help minimize unexpected costs and losses due to adverse decisions.

For those who deal with materials or services which the government views as sensitive or politically charged, such as media companies, the risk of legislative action is much greater. Companies in media industries are considered particularly risky in part due to the constantly changing nature of the industry and their reliance on public opinion to help keep them afloat.

More and more, businesses in all industries are utilizing technology to monitor and assess legislative risk. By keeping close tabs on upcoming laws, regulations, and executive orders, they can ensure they are up to date with all changes which may impact their operations. Similarly, companies with global footprints can also stay up to date regarding changes within foreign jurisdictions.

Although legislative risk cannot be eliminated entirely, entrepreneurs can mitigate its impact by staying apprised of all changes which could materially affect the way their business is run. Through proper monitoring, businesses can act quickly to adjust any processes which may be affected by new or existing legislation. As legislative risk is a constant for businesses across all industries, staying informed is key to mitigating various impacts.