8. The diagram below depicts a spectrum of risk from diversifiable (on the left hand side...

 

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8. The diagram below depicts a spectrum of risk from diversifiable (on the left hand side of the diagram) to non- diversifiable (on the right had side of the diagram). Explain why the risks to the left of the diagram are considered more diversifiable than the risks to the right of the diagram. (Note: do not confuse risk reduction within a company through risk management strategies with diversification of risk) (6 Marks) RISK AND RETURN Risk Classification Project Risk Firm Specific Risk One Competitiv e Risk A Few Sector -Specific Risk Exchange Rate & Political Risk Many Macroeconomi c Risk Market Risk All 8. The diagram below depicts a spectrum of risk from diversifiable (on the left hand side of the diagram) to non- diversifiable (on the right had side of the diagram). Explain why the risks to the left of the diagram are considered more diversifiable than the risks to the right of the diagram. (Note: do not confuse risk reduction within a company through risk management strategies with diversification of risk) (6 Marks) RISK AND RETURN Risk Classification Project Risk Firm Specific Risk One Competitiv e Risk A Few Sector -Specific Risk Exchange Rate & Political Risk Many Macroeconomi c Risk Market Risk All