Which pair of risks describes investing in a company?

• A. Systemic and operational risks
• B. Systemic and unsystematic risks
• C. Credit and liquidity risks
• D. Market and currency risks

Answer: (B)

When you invest in a company, you deal with two broad risk types: systemic risk and unsystematic risk. Systemic risk comes from factors that affect almost all investments—things like economic downturns, rising interest rates, or broad market declines—and it cannot be eliminated just by holding more assets. Unsystematic risk is specific to the particular company—its management decisions, product launches, competitive position, or regulatory changes. Since owning shares ties you to both how the overall market moves and how the company itself performs, this pairing best describes the risks involved.

The other options mix risk categories that don’t align as cleanly with buying a single company. For example, credit and liquidity risks are more associated with debt instruments or trading conditions, and market and currency risks include currency exposure that isn’t inherent to the fundamental risk of owning a company’s stock.