Unsystematic risk, also known as specific risk, diversifiable risk, or idiosyncratic risk, refers to the risk associated with individual securities, assets, or companies within a portfolio that can be reduced or eliminated through diversification. Unsystematic risk arises from factors specific to a particular company, industry, or asset class, such as business operations, management decisions, competitive dynamics, regulatory changes, or adverse events, and is independent of broader market movements or systematic factors affecting all investments. Unsystematic risk can be categorized into business risk, financial risk, operational risk, legal risk, and environmental risk, each representing specific threats or uncertainties that may impact the financial performance or value of an investment. The advantage of unsystematic risk is that it can be mitigated through portfolio diversification, spreading investment capital across multiple assets, sectors, or industries to reduce exposure to company-specific risks and minimize the impact of adverse events on overall portfolio returns. However, the disadvantage of unsystematic risk is that it cannot be eliminated entirely, as it is inherent to individual investments and may persist despite diversification efforts, potentially affecting portfolio performance and increasing volatility, requiring ongoing monitoring, rebalancing, and risk management to address changing market conditions and investment objectives.