Dominate the ACCA F9 Financial Management Exam 2025 – Master Your Finance Future!

The correct answer is systematic risk. This term refers to the portion of risk that affects the entire market or a broad range of assets. Systematic risk arises from factors that impact the overall economy, such as changes in economic policies, political events, natural disasters, or global market changes.

Unlike unsystematic risk, which is specific to an individual company or industry and can be reduced through diversification, systematic risk remains even when a portfolio is diversified. This is because systematic risk is linked to factors that affect all investments in the market to some degree. Consequently, all investors are exposed to it, and it cannot be mitigated simply by holding a diversified portfolio.

Understanding systematic risk is crucial for investors, as it influences market movements and impacts the pricing of assets across the board. Recognizing that this risk exists helps in making informed investment decisions and developing strategies to manage the potential impact on investment returns.