Company-specific risk

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Company-specific risk

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