Tag: systematic risk

E-Business Risk

Posted by WFG – August 24, 2011

E-business risk is everywhere and it can severely damage your company reputation. But in this day and age not using internet technology would leave you falling behind the competition. So how do you get by and manage the potential e-business risks?

What Is E-Business?

Computer Keyboard - stock photo

Image courtesy of espensorvik

In the most basic terms, e-business is using internet technology for your business. By using this, companies can reach out to more customers, speed up their services and create a better product. It’s an ever changing part of the industry, but learning how to use it isn’t the hardest part of e-business. One of the toughest aspects is keeping up with the progression. One of the e-business risks is being left behind, but by staying one step ahead of the industry you can use it to your advantage. Some of the examples of e-business are:

  • E-mail
  • Online Banking
  • Customer Relationship Management
  • Business to Business Data Exchange
  • Commercial Transactions Read the rest of this article

Unsystematic Risk

Posted by Winflow – July 9, 2011

There are two fundamental risks that go along with investing; systematic risk and unsystematic risk. Unlike systematic risk, unsystematic risk only affects a small portion of shareholders. It is typically company or industry specific and has to do with unforeseen events like strikes or loss of a key account. Luckily, there are a number of ways to reduce the impact unsystematic risk will have on your portfolio. Consider the following when building your investment portfolio:

  • The best way to reduce unsystematic risk is to diversify your portfolio. This means investing in a number of companies instead of putting all of your eggs in one basket. This way, if something unforeseen does happen to affect the stock price in a particular company, you have other investments in your portfolio to fall back on.
  • When diversifying your portfolio, your investments should be in more one than one industry. If you limit your investments to one industry you could find all of your stocks losing money if an industry-wide unsystematic risk happens.
  • There is a formula to help determine unsystematic risk. First, you should find the beta coefficient for your investment. You can do this through online investment services. You should then choose what percent of your investments to place in a particular stock. Quick tip: the lower the beta coefficient the less you have to worry about unsystematic risk. After you have decided what percent of your investments to place in a particular stock, follow this formula to determine overall beta and resulting risks:
    • Beta (total) = Percentage of overall investment x beta coefficient.
  • You can also cater the above formula to determine the systematic risk of more than one company at a time as seen through the following formula:
    • Beta (total) = Percentage of  first overall investment x first beta coefficient + Percentage of second overall investment x second beta coefficient.

Systematic Risk

Posted by WFG – June 22, 2011

The threat of systematic risk is always present, even for the investors that are great at portfolio risk analysis. When you are talking about a trader, they will always be aware of systematic risk and will look for new ways to hedge it.

But what is systematic risk? This is the risk that the whole financial markets will crash, much like the recession in 2008. It can be caused by a number of reasons such as interest rate hikes, a subprime crisis or a country defaulting on its debt. The threat of systematic risk is very real in the modern market with much of Europe in a crisis.

So, how do we hedge out systematic risk and make it less of a threat? For starters, you won’t be able to wipe it out completely. When a market crashes all investments will be sold, apart from flight of safety investments, and even these aren’t always safe. But there are ways of lowering risk. In US, the USD represents the economy for the country. Reducing the exposure to the US economy you can ultimately reduce the systematic risk. You can do this by evaluating the stocks.

By using portfolio management investment you can change the stocks you own.  For every market you’re long, you should try to gain a shorter position. This will give you an advantage when the market sees problems and the value of the USD changes.