Specific Risk
Categories: Insurance
You run a snake habitat, The RattleDome. One of your professional dangers is the chance that you’ll die from cobra venom. However, that risk doesn’t represent a common problem for most workers. The guy who runs the ice cream truck probably doesn’t think too much about snake bites in his day-to-day.
Snake bites are a specific risk for your job. It isn’t a general risk. It’s not something like the risk of getting fired, or the risk that you won't save enough for retirement. Those are systematic risks for anyone having a job. But death by cobra venom only affects you, your immediate coworkers, and people with your job at other snake habitats.
In the financial world, the term "specific risk" refers to dangers that only impact a limited number of assets in a portfolio. It stands in opposition to systematic risk, which impacts everything you own.
The risk that snowfall in Colorado is below expectations this winter only poses a risk if you own shares of a ski resort company. It's a specific risk. The risk that the Federal Reserve will jack up interest rates, on the other hand, represents a systematic one.
