Guest Blogger: Contributed by Dr. Edward Graham, Professor of Finance and Real Estate at the Cameron School of Business, UNCW (this post originally appeared on WilmingtonBiz.com on June 15, 2020).
Economic or financial risk is generally of two types: systematic and non-systematic. Non-systematic risk is risk that impacts a specific asset or group of assets – like a UAW strike impacting Ford and GM, or Mad Cow Disease impacting Wendy’s or McDonalds. Systematic risk concerns itself with factors that impact the entire economy, like the housing and financial crisis of eleven or twelve years ago motivating the Great Recession. The Covid “pandemic,” in turn, now manifests itself as a clear example of systematic risk, impacting the whole economy. But the pandemic has impacted some sectors of the economy far more than others.