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Regulatory Risk

Regulatory Risk

Definition

The risk that a change in laws and regulation will significantly impact an institution. A change in laws or regulations enacted by a governmental or regulatory body can dramatically increase the costs of conducting a business, decrease the attractiveness of an investment, or change the competitive landscape. For example, regulatory risks arising from climate change concerns include (1) more vigorous disclosure requirements regarding a manufacturer's emissions and (2) the emergence of minimum performance standards tied into energy consumption and greenhouse gas emission controls.
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