Question

Respond to the following in a minimum of 175 words:

• Based on the information you learned this week, what approach would you take in explaining how systematic and unsystematic risks affect risk planning?
• Describe your approach.
• Name 3 or more systematic or unsystematic risks your company might face.
• Think of some implications if your company decides not to be proactive and plan for these risks.

Answer 1

One can minimise the systematic as well as an systematic risk through diversification of the portfolio and hedging through various strategies.

Systematic risk cannot be completely eliminated but unsystematic risk can be eliminated through optimum portfolio diversification.

Three systematic risks are inflation, change in interest rates, political instability in the country.

Three unsystematic risk are change in demand pattern, change in supply pattern, loss of major supplier.

If comps did not plan for this risk then it can lead to losses and it can also have a contagious effect on the operation of company.