An Unsystematic Risk

Often, we get asked by students for examples of unsystematic, or firm specific, risks. We are sure that you have heard about Dieselgate, or Volkswagen's deliberate programming of emissions devices in its diesel vehicles to fool emissions tests. Dieselgate is a perfect example of unsystematic risk as it affects only Volkswagen, although it appears that other auto makers may face unsystematic risks as well as several other manufacturers may have similarly created programming to cheat emissions tests. If you think about Volkswagen's actions and the risk, the news will likely greatly affect VW's sales as some consumers will avoid the company's vehicles. And while these consumers will be forced to look elsewhere, the sheer number of alternative manufacturers means that it is unlikely any particular manufacturer will receive a huge spike in new customers.