1. Sri Ramakrishna College of Arts &
Science
Coimbatore – 06.
Topic: Risk
M.VADIVEL
Assistant Professor
Department of B.Com PA
Sri Ramakrishna College of Arts & Science
Coimbatore.
5. Meaning
Systematic risk refers to the probability of loss linked
with the whole market segment such as changes in
government policy for the specific industry. While risks
associated with industry is referred to as unsystematic
risks like labor strike.
6. Categories
Systematic risk is divided into three categories namely, interest
risk, market risk, and purchasing power risk. While
unsystematic risk is divided into categories namely business
risk and financial risk.
7. Nature
Systematic risk occurs due to uncontrollable factors such as
natural calamities. As opposed to the unsystematic risk which
is due to controllable factors such as the production of
undesirable products.
8. Factors
Systematic risk occurs due to macroeconomic factors such as
social, economic and political factors. While the unsystematic
risk occurs due to the micro-economic factors such as labor
strikes.
12. Business risk:
Risk inherent to the securities, is the company may or may not perform
well. The risk when a company performs below average is known as a
business risk. There are some factors that cause business risks like changes
in government policies, the rise in competition, change in consumer taste
and preferences, development of substitute products, technological
changes, etc.
13. Financial risk:
Alternatively known as leveraged risk. When there is a change
in the capital structure of the company, it amounts to a
financial risk. The debt – equity ratio is the expression of such
risk.
16. • Interest risk: Risk caused by the fluctuation in the rate or
interest from time to time and affects interest-bearing
securities like bonds and debentures.
17. Market risk:
The risk influences the prices of a share, i.e. the prices
will rise or fall consistently over a period along with other
shares of the market.
18. Inflation risk:
Alternatively known as purchasing power risk as it
adversely affects the purchasing power of an individual. Such
risk arises due to a rise in the cost of production, the rise in
wages, etc.
19. Basis for Comparison Systematic Risk Unsystematic Risk
Meaning Systematic risk refers to the
hazard which is associated
with the market or market
segment as a whole.
Unsystematic risk refers to
the risk associated with a
particular security,
company or industry.
Nature Uncontrollable Controllable
Affects Large number of securities
in the market.
Only particular company.
Types Interest risk, market risk
and purchasing power risk.
Business risk and financial
risk
Protection Asset allocation Portfolio diversification