Company-specific risk

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Company-specific risk

Company-Specific Risk

An unsystemic risk specific to a certain company's operations and reputation. For example, if a widget wholesaler has only one supplier and the supplier goes bankrupt, this could greatly impact the wholesaler's sales, profits, and other operations. Also, a company may have a bad reputation, making their operations difficult in a certain area. For example, a company that refuses to hire union workers might prove unprofitable if it opens a branch in a strongly pro-union town. Company-specific risks are difficult to quantify and thus qualitative analysis is needed to determine their natures and likelihoods. They may be reduced by appropriate diversification.

References in periodicals archive ?

of the company specific risk premium used in reaching the WACC").

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Idiosyncratic risk, or company specific risk, typically doesn't play a large role, as macro managers tend to be more concerned with systematic risk exposure; that is, broad thematic exposure.

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It isolates the cost of managing company specific risk sources and ties these costs to actual performance.

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* Insufficient adjustment for company specific risk factors.

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Company specific risks include increased competition from other businesses and changes in the ability of businesses to grow by increasing their sales and profits.

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* ERM thinking can help the accountant better understand the company specific risks. In a sense, enterprise risk management forces those involved with the process to see the big picture when it comes to risk exposures.

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