What is a specific risk?

We already know that in the world of financeKnowing the risk of the different financial assets with which we operate is extremely important to be able to assess the different options available.

The specific risk, as its name indicates, refers to the risk that is intrinsic to the characteristics of each financial product that we are considering. The specific risk will also be determined by some situations or decisions made by the company, as well as external factors (some decisions made by the business management, strikes that have occurred, reckless acts taken, etc.).

Specific risk is the opposite of systematic risk, and is also often called unsystematic risk or diversifiable risk. The reasons are obvious, and it is that with a diversification of the products that make up our portfolio, we could considerably reduce the risks that occur. However, this also depends on the assets we are considering, as some will provide more risks than others.

The uncertainty of the decisions made by the company is the main reason why unsystematic risk acquires the relevance it has. This uncertainty can come at the hands of company circumstances, or activities or acts that have arisen in the sector. As we have indicated, this can be due to a multitude of factors: decisions made by the company, strikes, contracts that it has made, sales that have originated in a period, etc.

In this way, company titles are affected, for better or for worse, the latter being a risk that the investor assumes when he decides to buy a certain business title. However, as in the stock markets, It is the decision of the company to carry out the purchase and sale of assets in order to recover the investment made obtaining results or losses, depending on the risk that we are assuming at that time forguilt of that company.

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