Which of the following best defines systematic risk?

Systematic risk refers to the inherent risk that impacts a broad range of assets and affects entire markets or economies, such as changes in interest rates, inflation, or geopolitical events. This type of risk is non-diversifiable, meaning it cannot be mitigated through diversification of investments. Unlike risks that are unique to a specific company or industry, systematic risk influences all investments and is tied to overall market behavior. This is why option B is the most accurate definition, as it encompasses risks that are widespread and affect the entire financial system.

The other choices represent different types of risk. Unique or company-specific risks (as mentioned in the first option) pertain to individual firms and can often be diversified away. Individual investment decisions involve personal choices that can lead to varying levels of exposure to risk, but this does not define systematic risk as a whole. Lastly, the risk of fraud within an organization is categorized as an operational risk and is specific to a single entity rather than a systemic issue impacting the broader market.