Question

What are 8 examples of firm specific risk?

Answer 1

Firm specific risk refers to the risk that is applicable to a particular Firm, its market or industry.

Examples of firm-specific risk:

1. Internal issues like reduced operational efficiency owing to redundant processes etc.

2. Management unable to protect a new product with a patent/copyright

3. Government imposing certain restrictions on the business or banning the product altogether

4. An inefficient capital structure leading to inconsistent earnings of the Firm

5. Frauds taking place within the Company at both executive or non executive levels

6. Product of the business on the verge of getting outdated due to lack of advanced technology

7. Increase in tax slabs applicable to the company leading to lower net income

8. fall in demand of a product owing to entry of a new competitor making a better version of the product