Systematic risks are general, and unsystematic risks are specific to an organization and industry. Systematic risks are unavoidable, while unsystematic risks are avoidable. It is imperative to know the differences between systematic and unsystematic and develop plans for the risk. Why?

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As a former banker, when a leader of a Fortune $500$ company, government, or another organization approached me for a business bank loan if their proposal did not address systematic and unsystematic risk, the business loan was declined immediately. For instance, when Kimberly mentioned regulations in the first sentence, regulations might be a systematic or unsystematic risk. For example, some regulations impact all businesses, like the tax codes, which are systematic risks. However, some regulations are specific to an organization and industry.

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Class, refer to page $351$ of our text and peer$-$reviewed study below. On page $351,$ Brealey, Myers, and Marcus $(2023)$ provided the definition and examples of systematic risk. Also, Eklund $(2022)$ provided examples of systematic risk. In particular, Eklund examined relationships between systematic risk and executive compensation. What are examples of systematic risk? What did class members find interesting when reading the study about systematic risk and executive pay?

References

Brealey, R$.,$ Myers, S$.,$ & Marcus, A$.(2023).$Fundamentals of corporate finance $(11$th ed$.).$ McGraw$-$Hill Education.