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It is a kind of unsystematic firm-specific risk that rather than affecting the whole industry or sector in which it operates has an impact on the price of the individual stocks.
A simple diversifiable risk example would be a labor strike or a regulatory penalty.
It can be unpredictable and can occur any time due to situations like labor strike, scam, regulatory penalty, natural disasters (Example - Earthquake in 2011 caused Asia financial crisis and led Japan to huge economic losses), wars, internal factors and management reshuffle that can result in the loss of market share.
Natural risks can be diversified if the shares are purchased in other countries and the risks associated with equities can be diversified by buying bonds or commodities.
One of the best methods to lower such risks is to diversify to reduce the unsystematic risks.
Business risk where the firm faces challenges internally and externally, but the possibility is specifically related to the firm.
Financial risk management shows how the capital and cash flow is structured across the firm or what are the strategies it can adopt in the condition of solvency or turmoils. If the capital structure is robust and the firm has an optimal level of debt and equity, it can manage many such conditions.
Management risk is difficult to manage a segment where the change in leadership can have a huge impact as it always leads to the threat of close associates of the outgoing leaders.
Non-diversifiable risks are controlled through methods like hedging where securities that are less exposed are selected like a portfolio designed on defensives at lower expected returns.
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