Concept
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This refers to risk that is not isolated to one particular company, trader, intermediary or institution. Systemic risk affects the underlying components of the integrated systems of the entire financial market or even the financial system itself. It is usually very hard to foresee as it can originate from almost anywhere in the system, and when it arrives, both its direct and indirect effects can be severe. This type of risk usually requires an overhaul or serious amendment of the system that perpetuated it. The most recent example of this was the 2008 financial recession, covered in more detailed elsewhere in the program, which was triggered by mortgage defaults in the United States.