What are the non systemic risks involved in financial management?

What does non-systematic risk include: Non-systematic risk: also known as "non-market risk" and "diversible risk".

As opposed to "systemic risk". Risks unrelated to fluctuations in the market, market, foreign exchange market and other related financial speculation markets. Non-systematic risk is caused by special factors, such as enterprise management problems, labor problems of listed companies, etc., which is a risk unique to a certain enterprise or industry, and only affects some of the best returns.

Unsystematic risks can be eliminated through diversification.

Company workers go on strike, new product development fails, important sales contracts are lost, lawsuits are lost, etc.

Non-systemic risks include the following five types of risks, which are as follows:

1. Operational risk. Operational risk mainly refers to the company's sluggish operation, or even failure or bankruptcy that brings losses to investors. Changes in the company's operation, production and investment activities lead to changes in the company's profits, resulting in a decrease or loss of investors' income principal.

For example, the business cycle.

or the impact of changes in the business cycle on the company's revenue, the impact of changes in competitors on the company's operations, and the company's own management and decision-making level may lead to operational risks;

There are many factors that affect the company's operating performance, and investors should grasp the macro economy when analyzing the company's business risks.

The impact of the general environment must also grasp different industries and different ownership systems.

the impact of different types, different business scales, different management styles, and different product characteristics on the company's operating performance;

2. Financial risk. Financial risk refers to the risk that the company may incur as a result of raising funds, i.e., the risk that the company may become insolvent. The irrationality of the company's financial structure often causes financial risks to the company.

The company's financial risks are mainly manifested in: inability to repay debts as they fall due, interest rate change risk, and refinancing risk.

The main factors that form financial risk include the debt-to-capital ratio, the maturity of assets and liabilities, and the debt structure. Generally speaking, the higher the company's debt-to-capital ratio, the more irrational the debt structure, and the greater its financial risk. Investors should pay special attention to the analysis of the company's financial risks when investing.

3. Credit risk.

Credit risk is also known as the default risk chamber.

It refers to the possibility of investors causing losses due to the failure to pay the principal and interest to the holder of ** on time. Mainly for bond investment varieties, logarithmic with ** will only appear in the case of company bankruptcy. The direct cause of the risk of default is the company's poor financial condition, and the most serious is the company's bankruptcy.

Therefore, whether it is for bonds or ** investments, investors must be interested in the credit rating of the bonds issued.

and the issuance of ** listed companies for a detailed understanding. "Only by knowing each other and knowing oneself can one not be defeated in a hundred battles";

4. Moral hazard.

Moral hazard mainly refers to the moral hazard of the managers of listed companies. The shareholders and managers of listed companies are in a principal-** relationship. Due to the different goals pursued by managers and shareholders, especially in the case of asymmetric information between the two parties, the behavior of managers may cause damage to the interests of shareholders;

5. Operational risks.

Financial risk refers to the risk caused by capital flow, financial management and other reasons in the operation process of an enterprise. In enterprise risk management, financial risk is a very important type of risk, which may have an adverse impact on the normal operation and development of the enterprise. So, is financial risk a systemic risk?

Let's take a look at this question.

First of all, systemic risk refers to the risk faced by the entire market or industry, and its impact is not limited to a single company, but will have a ripple effect on the entire market or industry. Systemic risk is usually caused by macroeconomic, political and other factors, and is not directly related to the internal operations of the enterprise. For example, financial crises, wars, and natural disasters are the main causes of systemic risks.

In contrast, financial risk is a risk caused by the company's own financial management problems. For example, insufficient liquidity, excessive debt, operating losses, etc., can lead to financial risks. Financial risks are usually localized, and their scope of impact is mainly the enterprise itself, and will not have a ripple effect on the entire market or industry.

Therefore, based on the above analysis, we can conclude that financial risk is not a systemic risk. Although financial risk has an important impact on the operation and development of an enterprise, its scope of impact is relatively local and will not have a ripple effect on the entire market or industry.

In contrast, the impact of systemic risk on the entire market or industry is comprehensive and far-reaching, and its impact is much larger than that of financial risk.

It is important to note that while financial risk is not a systemic risk, it is not a strong risk that means that companies can neglect the management and control of financial risks. On the contrary, enterprises should attach great importance to financial risks, and effectively control and reduce the occurrence of financial risks by strengthening financial management, optimizing capital flow, reducing liabilities and other means, so as to ensure the healthy development and long-term stability of enterprises.