1. Poor management decisions
2. Product recalls
3. Regulatory penalties
4. Sector-specific downturns (e.g., declining oil prices affecting energy companies)
Unsystematic risk can lead to significant losses if an investor’s portfolio is concentrated in a single company or sector. For example, the bankruptcy of Enron Corporation in 2001 wiped out shareholders’ investments, highlighting the dangers of unsystematic risk.
1. Poor management decisions
2. Product recalls
3. Regulatory penalties
4. Sector-specific downturns (e.g., declining oil prices affecting energy companies)
Unsystematic risk can lead to significant losses if an investor’s portfolio is concentrated in a single company or sector. For example, the bankruptcy of Enron Corporation in 2001 wiped out shareholders’ investments, highlighting the dangers of unsystematic risk.