When a large, interconnected organization fails or has a significant negative “financial event”, it can have a rippling effect in the marketplace; destabilizing economies and causing an entire industry to collapse. We label these incidents as a Systemic risk.
Many insights from the 2008 financial crisis identified that the consequences of an individual company-level event can be a source of systemic risk and must be examined. It is this reason governments and regulators intervene to prevent and minimize the rippling effect from impacting the economy as a whole. Systemic Risk is a recurrent and emerging risk that GRI continues to investigate and research.
The Great Recession provides a prime example of systematic risk. Anyone who was invested in the market in 2008 saw the values of their investments change because of this market-wide economic event, regardless of what types of securities they held.