Systematic and Unsystematic Risks
To explain how systematic and unsystematic risks affect risk planning, I would adopt a compare-and-contrast approach for the two sets of risks. The differences and similarities between the two sets of risks are discussed in the approach. Essentially, systematic risks refer to the possibility that a company loses money due to events associated with the entire market segment or the whole market. On the other hand, Unsystematic risk is associated with specific security or industry (Ghanizadeh et al., 2022). A major difference between the two risks lies in their controllability by a firm. With systematic risk, a firm cannot control or mitigate its occurrence, while with unsystematic risk, a firm can take measures to control it. However, it is worth noting that both systematic and unsystematic risks can influence the returns of stocks a company has invested in.
The company under my leadership is likely to face three types of systematic risks. First, the company will face exchange rate risks. Notably, this risk will influence the transactions involving different currencies, whereby the value of foreign currencies can change and influence the company’s securities. Second, the company is likely to face interest rate risk, which is a risk associated with market interest rates. According to Lin et al. (2022), this risk influences the stock market and the fixed-income securities that the company holds. Finally, the company is likely to face inflation or purchasing power risk, which erodes the purchasing power of money. The company will have little or no influence in stopping these risks (Brealey et al., 2020). However, a decision not to be proactive and plan for these risks can lead to significant losses. For instance, the company can lose when there are increases in interest rates and adverse exchange rates. Thus, it is not recommended that the company remain unreactive towards these risks.
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References
Brealey, R., Myers, S. C., Marcus, A. J. (2020). Fundamentals of corporate finance (10th ed). McGraw-Hill Education: New York, NY
Ghanizadeh, B., Dastgir, M., & Soroushyar, A. (2022). The Impact of CEOs’ Financial Knowledge of Unsystematic Risk, Considering the Moderating Effect of Managerial Ability. Iranian Journal of Accounting, Auditing, and Finance.
Lin, T., Tsai, C. C. L., & Cheng, H. W. (2022). Asset Liability Management of Longevity and Interest Rate Risks: Using Survival–Mortality Bonds. North American Actuarial Journal, 1-22.
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Question 
You are the Chief Risk Officer for a company, and you’ve been tasked with identifying the areas where your company is exposed to systematic and unsystematic risks.
Systematic and Unsystematic Risks
Respond to the following in a minimum of 175 words:
Based on the information you learned this week, what approach would you take in explaining how systematic and unsystematic risks affect risk planning?
Describe your approach.
Name 3 or more systematic or unsystematic risks your company might face.
Think of some implications if your company decides not to be proactive and plan for these risks.
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