Non systematic risk is an investment risk that is specific to an issuer or an industry. Events that impact one industry will not necessarily impact another unrelated industry. For example a weak economy may have a significant impact on the auto manufactures, but no impact on companies in the drug industry. Non systematic risk may also be the result of a problem at one particular company. Should a large computer chip maker lose a big contract the price of that company’s stock may decline significantly as a result. However, this will have no impact on other companies. As it is a company specific issue.
Applying "Nonsystematic Risk" to Securities Exams:
Often times the value of an investment will fluctuate with the market as a whole. If the market is generally declining the value of an investment may decline simply because the market as a whole is falling. This is known as systematic risk. Other times an investment may loss value as a result of problems with a specific company or industry. When the Government sued the tobacco companies or when a company faces a major issue these would be examples of non systematic risk. An investor may diversify out of non systematic risk.