Specific risk

Specific risk (risque spécifique, or idiosyncratic risk) is the portion of a company's total risk that is unique to that company and not correlated with general market movements — key person dependency, customer concentration, technology uncertainty, regulatory exposure, governance weaknesses. Unlike systematic risk captured by beta, specific risk is not diversified away in a concentrated holding. In unlisted company valuation, it is quantified through the SCRP (Specific Company Risk Premium) added to the cost of equity — the higher the idiosyncratic risk concentration, the higher the SCRP.

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Example: a Swiss precision SME presents three documented specific risks: CEO personally manages 80% of key accounts (key person risk: 1.5%), 65% of revenue from a single automotive client (customer concentration: 2.0%), sole-source raw material supplier (supply chain concentration: 1.0%). Total SCRP: 4.5%, raising the cost of equity from 10.5% to 15.0% and reducing the DCF enterprise value by approximately 20% versus an average-risk comparable.

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Hectelion documents specific risk components individually with supporting evidence in every valuation report.