DEFINITION of 'Company Risk'

The financial uncertainty faced by an investor who holds securities in a specific firm. Company risk can be mitigated through diversification; by purchasing securities in additional companies and uncorrelated assets, investors can limit a portfolio's exposure to the ups and downs of a single company's performance.

Company risk is also called "specific risk," "unsystematic risk" or "diversifiable risk."

BREAKING DOWN 'Company Risk'

Systematic risk, on the other hand, refers to the uncertainties associated with investing in the broader market. It cannot be diversified away because it affects all the securities in the market. Major political and economic events such as wars and recessions are examples of events that pose systematic risk. Investors can reduce their exposure to systematic risk through hedging.

Assuming risk is an essential part of achieving investment gains, but the amount of risk undertaken can be managed and customized to each investor's time frame, required rate of return and risk tolerance.

  1. Systematic Risk

    Systematic risk, also known as "market risk," is risk inherent ...
  2. Specific Risk

    Specific risk is a risk that affects a minimal number of assets.
  3. Price Risk

    The risk of a decline in the value of a security or a portfolio. ...
  4. Risk Management

    Risk management occurs anytime an investor or fund manager analyzes ...
  5. Systematic Manager

    A manager who adjusts a portfolio’s long and short-term positions ...
  6. Idiosyncratic Risk

    Risk that is specific to an asset or a small group of assets. ...
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  1. Why should investors be concerned with risk management?

    Learn what risk management is, the difference between systematic and unsystematic risk, and why investors should be concerned ... Read Answer >>
  2. How does market risk differ from specific risk?

    Learn about market risk, specific risk, hedging and diversification, and how the market risk of assets differs from the specific ... Read Answer >>
  3. Systemic versus systematic risk: What's the difference?

    Systemic risk generally refers to an event that can trigger a collapse in a certain industry or economy as systematic risk ... Read Answer >>
  4. What are the primary sources of market risk?

    Learn about market risk and the four primary sources of market risk including equity, interest rate, foreign exchange and ... Read Answer >>
  5. How does systematic risk influence stock prices?

    Understand how systematic risk can influence the prices of stocks and how strategic asset allocation can help reduce systemic ... Read Answer >>
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