company risk

Company Risk

Risk that might cause a loss to one company but not to other, similar companies. An example of company risk is the possibility of a strike by a company's employees. One may mitigate company risk by buying securities of multiple companies in the same industry. For example, a particular oil company has the company risk that it may drill little or no oil in a given year. An investor may mitigate this risk by investing in several different oil companies. Company risk is a type of nonsystematic risk.

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company risk

The risk that certain factors affecting a specific company may cause its stock to change in price in a different way from stocks as a whole. For example, the profits and stock price of a firm selling an unusually large portion of its output to foreign customers are subject to certain factors, such as changes in foreign exchange rates, that are less important to other companies.

Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.