The main differences between systematic and unsystematic risk are described as follows:
1. Significance
Systematic risk: It is a part of the overall market risk that arises from external factors such as economic factors, political factors and sociological factors.
Unsystematic risk: It refers to the part of the risk that is related to the internal factors in the company and arises.
2. Nature
Systematic risk: It is a non-diversifiable risk that cannot be reduced or controlled by management.
Unsystematic risk: It is a diversifiable risk that management can reduce or control.
3. Factors
Systematic risk: it occurs due to the external factors.
Unsystematic risk: It occurs due to internal or organizational factors.
4. Influenced
Systematic risk: it affects the entire market and the economy.
Unsystematic risk: it only affects a specific industry or company organization.
5. Measurement
Systematic risk: It is measured using Security's beta. Beta is the indicator of systematic risk.
Unsystematic Risk: There is no such tool to indicate or measure this type of risk. It is calculated by subtracting the systematic risk from the total market risk.
6. Sources
Systematic risk: market risk, interest rate risk, purchasing power risk, etc. are the main sources of this type of risk.
Unsystematic risk: business risk, financial risk, bankruptcy risk are the main sources of unsystematic risk.
7. Examples
Systematic risk: interest rate changes, inflation, price changes, high unemployment, etc. are the common examples of these types of risk.
Unsystematic risk: High staff turnover, high operating costs, strikes in the company, etc. are examples of unsystematic risks.
