What is Systematic Risk and Unsystematic Risk? Give examples.

Risk may be classified according to controllability, i.e Controllable risk and Uncontrollable risk. In other words, the Controllable risk is categorized as Unsystematic Risk and Uncontrollable risk is categorized as Systemic Risk. The concept of Systematic and Unsystematic risk may be further explained as under: Systematic Risk Unsystematic Risk It is not fully uncontrollable by an organisation. It is usually controllable by an organisation. It is not entirely predictable It is reasonably predictable. It is usually of a macro nature. It is normally micro in nature. It usually affects a large number of organisations operating under a similar stream. If not managed it directly affects the individual organisation first. It cannot be fully assessed and anticipated in advance in terms of timing and gravity. It can be usually assessed well in advance with reasonable efforts and risk mitigation can be planned with proper understanding and risk assessment techniques. The example of such type of risks is Interest Rate Risk, Market Risk, Purchasing Power Risk The examples of such risk are Compliance risk, Credit Risk, Operational Risk.