What type of risk is specific to an individual company or industry?

Unsystematic risk, also known as specific risk or idiosyncratic risk, refers to the risk that is unique to a particular company or industry. This type of risk is associated with factors that can affect a single company's stock price, such as management performance, company policies, industry trends, or other company-specific events like product recalls or regulatory changes. Unlike systematic risk, which affects the entire market or a broad sector, unsystematic risk can often be mitigated through diversification—by holding a varied portfolio of assets, investors can reduce the impact of negative events affecting any one company.

In contrast, systematic risk encompasses the broader economic factors that affect all companies, such as interest rate changes, inflation, or geopolitical events. Market risk is a synonym for systematic risk, while capital risk typically refers to the possibility of losing financial capital and is not as narrowly defined as unsystematic risk. Thus, identifying unsystematic risk as a specific concern for individual companies highlights the unique challenges that can arise within a particular corporate or industry context.