Eighty percent of company executives have little or no confidence in their organisation's ability to manage emerging legal risks, according to a new survey of senior business figures.

The finding is one of a number of results drawn from a survey of CEOs, senior in-house lawyers and compliance professionals carried out by Berwin Leighton Paisner (BLP), which aimed to shed light on how companies are addressing the issue of legal risk – defined by the report as 'the legal aspects of operational risk'.

Just two out of 10 respondents to the survey were confident in the ability of their business to identify and mitigate against emerging legal risks, with 44% expressing reservations and a further 20% stating they were not confident in their organisation's ability to tackle 'unknown unknowns'.

The report, which cites the payment protection insurance and swaps mis-selling scandals as examples of legal risk failures with multibillion-pound consequences, also found 80% of respondents agreed that material legal risks are likely to arise from their organisation's day-to-day business activities, with legislation and regulatory issues the number one concern, ahead of contractual issues and litigation.

PricewaterhouseCoopers head of global legal services transformation Stephen Allen commented: "The potential impact of business risks that result from law and regulation are largely misunderstood. Losses are often written off as 'operational failings' because they materialise outside of the legal team. And the importance and underlying reasons for such losses are often missed.

"With greater knowledge and focused management, many organisations can greatly reduce the impact of these risks."

The survey, which drew on the input of executives around the world working in 11 sectors including banking, insurance, manufacturing, energy and utilities, found that 60% of all respondents said they had a clear understanding of legal risk, including just 50% of risk and compliance professionals and only one quarter of CEOs/director-level professionals.

BLP legal risk consultancy head Matthew Whalley (pictured) said: "Little work has been done to help executives understand the concept of legal risk – it has been classed simply as 'something that lawyers deal with'."

"In-house legal departments need to understand these issues better, and go out into the business to identify where they are likely to occur. Business decisions are being taken without a full picture of the risks involved – and by the time issues reach the dispute stage, it's too late."

"More attention has been paid to legal risk over the last 12 months – the better you are at identifying risk, the better able you are to mitigate losses, and therefore free up capital for your business."