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").
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.
It isolates the cost of managing company specific risk sources and ties these costs to actual performance.
* Insufficient adjustment for company specific risk factors.
in addition, there may be times that we may need to undertake ad hoc engagements at short notice to address company specific risks that arise.
Company specific risks include increased competition from other businesses and changes in the ability of businesses to grow by increasing their sales and profits.
Company Specific Risks to Dividends.....................................................................
* 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.