Legal Risk Assessment

---
name: legal-risk-assessment
description: Assess and classify legal risks using a severity-by-likelihood framework with escalation criteria. Use when evaluating contract risk, assessing deal exposure, classifying issues by severity, or determining whether a matter needs senior counsel or outside legal review.
---

# Legal Risk Assessment Skill

Assess and classify legal risks using a structured framework based on severity and likelihood.

**Important**: You assist with legal workflows but do not provide legal advice. Risk assessments should be reviewed by qualified legal professionals.

## Risk Assessment Framework

### Severity x Likelihood Matrix

**Severity** (impact if the risk materializes):

| Level | Label | Description |
|---|---|---|
| 1 | **Negligible** | Minor inconvenience; no material impact |
| 2 | **Low** | Limited impact; minor financial exposure (< 1% of contract value) |
| 3 | **Moderate** | Meaningful impact; material financial exposure (1-5% of value) |
| 4 | **High** | Significant impact; substantial exposure (5-25% of value); regulatory scrutiny |
| 5 | **Critical** | Severe impact; major exposure (> 25% of value); regulatory action likely |

**Likelihood** (probability the risk materializes):

| Level | Label | Description |
|---|---|---|
| 1 | **Remote** | Highly unlikely; no known precedent |
| 2 | **Unlikely** | Could occur but not expected |
| 3 | **Possible** | May occur; some precedent exists |
| 4 | **Likely** | Probably will occur; clear precedent |
| 5 | **Almost Certain** | Expected to occur; triggering events present |

### Risk Score = Severity x Likelihood

| Score Range | Risk Level | Color |
|---|---|---|
| 1-4 | Low Risk | GREEN |
| 5-9 | Medium Risk | YELLOW |
| 10-15 | High Risk | ORANGE |
| 16-25 | Critical Risk | RED |

## Risk Classification with Recommended Actions

### GREEN -- Low Risk (1-4)
- Accept and document
- Monitor in periodic reviews
- No escalation required

### YELLOW -- Medium Risk (5-9)
- Implement specific controls
- Monitor actively (monthly)
- Assign owner
- Brief stakeholders

### ORANGE -- High Risk (10-15)
- Escalate to senior counsel
- Develop mitigation plan
- Brief leadership
- Consider outside counsel
- Define contingency plan

### RED -- Critical Risk (16-25)
- Immediate escalation to General Counsel / C-suite
- Engage outside counsel immediately
- Establish response team
- Consider insurance notification
- Daily or more frequent review

## Risk Assessment Memo Format

```
## Legal Risk Assessment

**Date**: [assessment date]
**Assessor**: [person]
**Matter**: [description]

### 1. Risk Description
[Clear description of the legal risk]

### 2. Background and Context
[Relevant facts and business context]

### 3. Risk Analysis
#### Severity: [1-5] - [Label]
[Rationale]
#### Likelihood: [1-5] - [Label]
[Rationale]
#### Risk Score: [Score] - [GREEN/YELLOW/ORANGE/RED]

### 4. Contributing Factors
[What increases the risk]

### 5. Mitigating Factors
[What decreases the risk]

### 6. Mitigation Options
| Option | Effectiveness | Cost/Effort | Recommended? |
|---|---|---|---|
| [Option] | [H/M/L] | [H/M/L] | [Yes/No] |

### 7. Recommended Approach
[Specific recommendation with rationale]

### 8. Residual Risk
[Expected risk after mitigations]

### 9. Monitoring Plan
[How and how often to monitor]

### 10. Next Steps
1. [Action - Owner - Deadline]
```

## When to Escalate to Outside Counsel

### Mandatory
- Active litigation
- Government investigation
- Criminal exposure
- Securities issues
- Board-level matters

### Strongly Recommended
- Novel legal issues
- Jurisdictional complexity
- Material financial exposure
- Specialized expertise needed
- M&A transactions

### Consider
- Complex contract disputes
- Employment matters
- Data incidents
- IP disputes