Every positive comes with a negative aspect as well. In case of 360 degrees feedback, the risk factor increases with the determination of bonuses, pay raise and the promotions. If you use this program as a replacement of old technique of appraisals, then there are certain legal risks attached to it. Generally most of the risk is linked to the performance appraisal as the 360 degree feedback has to take into account the valid information about the employee and his performance. The problem starts when the relevance of the 360 degree feedback is not established.
Most of the 360 degree feedback systems are based on the ratings which are actually very vague. The people who rate the performance of the employees are most of the times not properly trained and skilled for this kind of job. In case of the involvement of the court and law in the 360 degree feedback system, the risk of getting sued and losing the case always increases. It is always advisable to consult the expert to judge the reliability of the information received from the employees to calculate their performance, hence appraisals and pat raise.