Submitted by nsscadmin on
Today we’re starting a short two-part blog series that looks at two different types of risk. They are systemic risk and systematic risk. In part one we’ll focus on systemic risk.
Systemic risk is the risk that an event can cause a major collapse in a specific industry or the overall economy. A real-life example includes the failure of some banks that led to the 2008 financial collapse. The banking failure led to monumental impacts on national and global markets.
So essentially systemic risk is the risk that a smaller event, such as the collapse of a business, an industry, or even a specific financial institution can have far-reaching effects because of its connection to other institutions that in turn can harm a large section or even the entirety of the financial system or economy.
Next week we’ll examine systematic risk