What does litigation risk refer to?

Litigation risk refers to the potential for legal action arising from disputes, particularly those related to contracts. This includes the possibility of lawsuits resulting from alleged breaches of contract between parties, which can lead to financial losses, damage to reputation, and resource allocation to defend against such claims. Understanding litigation risk is essential for maintaining effective supply chain operations, as it highlights the importance of clear and enforceable contracts, as well as compliance with legal requirements to minimize the likelihood of disputes.

Regarding other options, supplier disruptions typically involve issues related to supply continuity and reliability rather than legal aspects. Losing market share pertains more to competitive dynamics and consumer preferences, rather than legal ramifications. Risks associated with inventory management focus on stock levels, warehousing, and supply issues but do not directly encompass legal disputes or litigation risks.