A-Z Popular Blog Encyclopedia Search »

9 Examples of Unsystematic Risk

Unsystematic Risk is any risk that is specific to a company as opposed to the entire economy or an entire industry. Generally speaking, investors can reduce their exposure to unsystematic risk by diversifying their investments. By contrast, systemic risk that applies to an entire economy, industry or sector is more difficult to reduce with diversification. The following are illustrative examples of unsystematic risk.

Financial Risk

Financial risk is a broad category of risks that stem from the financial health, position and sustainability of a firm. For example, the risk that a firm with a large debt will fail to come up with enough liquidity to make a debt payment. Missing a debt payment can trigger a series of events that cause a firm to completely fail as creditors lose confidence in the firm and compete to pull their funding from the firm as quickly as possible.

Competitive Risk

Competitive risk is the risk that a firm will fall behind the competition in their industry such that revenue declines. For example, the risk that a shoe company will launch an entire line of shoes that consumers view as unattractive.

Operational Risk

Operational risk is the potential for the core revenue generating processes of a firm to fail in some way. For example, a firm that has quality control issues such that they release an unsafe product.

Strategy Risk

A risk that is specific to the strategy of a firm such as a firm that bets on a consumer trend that doesn't materialize.

Legal Risk

The potential for a costly legal dispute or liability.

Compliance Risk

The risk that a firm will fail to comply with laws and regulations.

Reputational Risk

Events that damage a firm's reputation amongst stakeholders such as investors, regulators, customers and employees. For example, a food safety issue that causes sales to plummet, brand image to be damaged, regulators to investigate and investors to flee.

Pure Risk

Pure risks are risks that have only a downside such that they can be insured. This includes things like fires and disasters. For example, a fire at a factory that disrupts a firm's operations for six months.

Inherent Risk

Inherent risk is the risk that a firm is misrepresenting its financial or competitive position. For example, a medical firm that claims to have a revolutionary product that is in fact a fraud.
Overview: Unsystematic Risk
A risk that is specific to a company as opposed to the entire economy or an entire industry.
Related Concepts

Investing Risk

This is the complete list of articles we have written about investing risk.
Business Risks
Commodity Risk
Credit Risk
Exchange Rate Risk
Falling Knife
Inflation Risk
Inherent Risk
Investing Risk
Liquidity Risk
Model Risk
Political Risk
Priced For Perfection
Refinancing Risk
Reputational Risk
Risk Of Ruin
Short Squeeze
Unknown Risks
Unsystematic Risk
Upside Risk
Value Trap
If you enjoyed this page, please consider bookmarking Simplicable.

Investing Risk

A list of common investment risks.

Priced For Perfection

The definition of priced for perfection with an example.

Price Risk

A definition of price risk with examples.

Inherent Risk

A definition of inherent risk with an example.

Trade War

An overview of trade wars with examples.

Short Squeeze

The definition of short squeeze with examples.

Speculative Risk

The definition of speculative risk with examples.

Audit Risk

The definition of audit risk with examples.

Risk Opposite

The true opposites of risk.


A few articles about investing.

Long Squeeze

The common types of long squeeze.

Business Cycle

The phases and causes of the business cycle.


The definition of microeconomics with examples.


The definition of freeriding with examples.

Precious Metals

An overview of what makes a metal precious including rarity related data.


The common types of CEO.

Smart Money

The definition of smart money with examples.

Dumb Money

The definition of dumb money with examples.
The most popular articles on Simplicable in the past day.

New Articles

Recent posts or updates on Simplicable.
Site Map