That diversification helps mitigate the
company-specific risks of investing in a mismanaged oil company that loses money when all its peers are prospering.
company-specific risks, instead of the CAPM, is that the assumptions
Question 2: Has the company evaluated and approved a cyber-security strategy addressing
company-specific risks?
We also see high potential upside in MRSK North Caucasus, but note that it bears fairly significant
company-specific risks.
They can thus gain extra protection against
company-specific risks, such as employee liability, by purchasing this already-insured risk via the reinsurance market.
The principles-based approach quantifies
company-specific risks with respect to individual products, eliminating the need to hold redundant reserves.
"While
company-specific risks will likely cause volatility, we believe that valuation is compelling relative to its growth prospects," the analyst wrote.
The reason is that an investor can easily diversify away these
company-specific risks without much cost.
The discount factor, or required rate of return, applied to future financial results is unique for any given company and is a function of market interest rates, the general risk associated with the equities markets at any point in time, risk factors peculiar to the industry or industries in which the company operates, and
company-specific risks that may reflect such factors as the product portfolio, potential legal liabilities, perceived opportunities or vulnerabilities, and, importantly, the credibility of management.
On our estimates, the market does not correctly price in individual earnings profiles and
company-specific risks. As a result we see major upside Co or downside eAE in most electricity distribution stocks.
Today, the framework is based on the determination of
company-specific risks. Although there are different approaches to modeling economic capital, current practice focuses on fat-tailed events to set up capital hedging against low-probability, extreme-loss events.
We raised our WACC estimates to reflect
company-specific risks associated with its relatively high debt burden and the value of investments held for sale.
