He vowed to reflect on the judgement which was made on Monday, adding "if we can do better we will" - but said police cannot be asked to do the impossible.
Mr Baggott continued: "I am concerned that the judgement may constrain our operational flexibility in the future and create an expectation that police will always be able to stop protests or arrest people at the time, irrespective of the particular circumstances.
"To do so may require significant force and undermine our attempts to work with communities."
It comes after High Court judge Mr Justice Treacy held that a senior officer misdirected himself in believing he was hampered by law from stopping the parades and arresting participants.
The PSNI's handling of the demonstrations also breached the human rights of a nationalist resident exposed to accompanying disorder, he found.
The judge said: "The impugned policing operation during the period complained of was characterised by an unjustified enforcement inertia."
His verdict was delivered in a case over weekly processions from east Belfast into the city centre during December 2012 and January 2013.
Demonstrations were staged in response to the decision to restrict the flying of the Union flag at City Hall.
A man who lives in the nationalist Short Strand district went to court in a bid to quash the PSNI's failure to provide assurances that it would prevent any future parade past his home.
He claimed this breached his privacy and family life entitlements under Article 8 of the European Convention on Human Rights.
It was also contended that police failure to prevent the parades contravened both the Public Processions (NI) Act 1998 and the Police (NI) Act 2000.
I would rather be accused of being too soft than of being too hard and robust and potentially see many people injured and the future jeopardise.
PSNI Chief Constable Matt Baggott
Lawyers for the resident, identified only as DB, argued that no notification was given for any of the parades in December or January.
Police instead allowed un-notified processions to take place and failed to arrest those involved in organising and taking part, they claimed.
Counsel for DB contended that he had been left "besieged" by the serious disorder, violence and attacks on his home.
Delivering judgment, Mr Justice Treacy set out how Assistant Chief Constable Will Kerr, the commander in charge of the PSNI operation around the protests, believed police were hampered in their ability to stop the parades by either the 1998 Act or human rights legislation.
"It is evident that ACC Kerr was labouring under a material misapprehension as to the proper scope of police powers and the legal context in which they were operating," he said.
The judge added: "I accept the applicant's submission that in the period following December 8 2012 until in or about the start of January 2013, ACC Kerr did not address himself to the question of whether to stop the weekly parade, nor did the police behave proactively, or at all, in relation to prosecuting those organising and participating in the parades."
No explanation was given for why, having facilitated some form of protest at City Hall, protesters were permitted to march back via the Short Strand when the return leg was associated with serious public disorder, the judge pointed out.
He also commented that, even though police had met with march organisers as far back as 9 January, the decision to take action against high profile organisers was not made until 25 February - after the decision had been made to stop the marches.
"Nor has it been satisfactorily explained why, on March 14 2013, over three months after the illegal parades commenced, only six people had been arrested for offences under the 1998 legislation," Mr Justice Treacy said.
He stated that ACC Kerr does not appear to have fully appreciated that an un-notified parade has the same status as one which takes place in defiance of a Parades Commission determination.
Granting the judicial review against the PSNI, the judge said: "Police misdirected themselves believing that because there was no determination there was a lacuna or complexity in the applicable legal provisions which hampered their ability to efficiently and effectively police these parades.
"This was simply wrong and I consider that it was this misdirection which explains and led to the situation in which the police facilitated illegal and sometimes violent parades with the effect of undermining the 1998 Act, in breach of their duties under section 32 of the Police (NI) Act 2000 and in breach of the applicant's Article 8 rights."
Padraig Ó Muirigh, solicitor for the Short Strand resident, described the judgment as hugely significant for the policing of any future parades and protests.
He said: "My client hopes that this will prevent any recurrence of what happened last year when his home was attacked while police facilitated these illegal parades."