Contract risk
Contract risk refers to the potential financial, legal, or operational exposure arising from unfavorable contract terms, non-compliance, or failure to meet contractual obligations.
Contract risk encompasses any scenario where a contract creates financial loss, legal liability, or reputational damage, whether through poorly negotiated terms, missed obligations, or unexpected customer behavior.
Example: A SaaS company that commits to 99.9% uptime in a contract without adequate infrastructure faces contract risk: if uptime falls below the SLA, the customer may claim service credits or terminate the contract, creating revenue loss.
