Unsystematic Risk


Unsystematic risk refers to the risks that are specific to a particular investment or company. These risks are not related to the overall market conditions but are instead influenced by factors unique to that investment or company, such as industry-specific events or company-specific issues. Unsystematic risk can be reduced by diversifying investments across different assets or industries. By spreading investments, investors can minimize the impact of negative events that may affect a single investment. The goal is to focus on the risks that are related to broader market factors, known as systematic risk, rather than the risks specific to individual investments.

Further Explanation

Unsystematic risk, also known as specific risk or diversifiable risk, refers to the risk that is specific to a particular investment or company and can be reduced or eliminated through diversification. It is the risk that is unique to an individual asset or industry and is not related to broader market factors.

Unsystematic risk arises from factors that affect a specific company or industry, such as company-specific events, management decisions, competitive dynamics, technological changes, or regulatory developments. These risks can have a significant impact on the performance of an individual investment or company, but they can be reduced by diversifying investments across different assets or industries.

By diversifying their investment portfolios, investors can mitigate unsystematic risk by spreading their investments across different companies, sectors, or asset classes. This helps to reduce the impact of negative events that may affect a single investment or industry. The goal of diversification is to minimize the impact of unsystematic risk and focus on the systematic risk that is related to broader market factors.

Unsystematic risk is considered to be “idiosyncratic” in nature, meaning it is unique to a specific investment and cannot be eliminated through broad market movements. It is important for investors to understand and manage unsystematic risk to reduce the potential impact of adverse events on their investment portfolios.

It’s worth noting that unsystematic risk can be difficult to predict or eliminate entirely, but through diversification and thorough analysis of individual investments, investors can minimize its impact on their overall portfolio.

Why Appoint Valtech as Valuation Adviser?

Valtech’s team has provided valuation advice to over 200 listed companies in Hong Kong, China, Singapore, Taiwan, Australia, the United Kingdom, the United States and Germany.

Valtech Valuation is a professional valuation firm accredited with ISO-9001 in valuation advisory services. The financial market and valuation requirements are highly dynamic. We are determined to develop and maintain a quality management system to foster an environment which is sustainable and evolving continuously. Our founders stress on development of a system and an environment that our consultants are provided with necessary support and opportunities to thrive.

We are a team of professionals from multiple disciplines including audit, financial modelling, tax, internal control and surveying. Our management adheres professional excellence. Abundant resources are reserved to develop standardized policies and procedures for quality control. We have solid track record in valuation advisory for listed companies, private equity, fund managers and financial institutions. We work closely with big four and other international accounting firms, corporate financial advisors, fund managers and legal advisors.

Valtech Advantages:

Advanced Valuation Techniques: Valtech Valuation can develop and implement advanced valuation techniques that are specifically tailored to the needs of clients. These techniques can go beyond traditional valuation methods and incorporate factors such as market trends, industry benchmarks, and risk analysis to provide more accurate and insightful valuations.

Customized Valuation Models: Valtech Valuation can create customized valuation models that align with the unique investment strategies and asset classes. By understanding the specific requirements and objectives of these entities, Valtech Valuation can develop models that capture the nuances of their portfolios, resulting in more precise and relevant valuations.

Data-driven Insights: Valtech Valuation can leverage its access to comprehensive data sources and analytics tools to provide data-driven insights. By analyzing market data, economic indicators, and performance metrics, Valtech Valuation can offer valuable insights into the valuation of assets, identify emerging trends, and help inform investment decision-making.

Adherence to Compliance and Reporting Standards: Valtech Valuation can ensure that valuation practices adhere to regulatory compliance and reporting standards. By staying updated on relevant regulations, such as accounting standards and industry guidelines, Valtech Valuation can help clients meet their reporting obligations accurately and in a timely manner.