Koncentrationsiriski

Koncentrationsriski is a Swedish term that translates to "concentration risk." It refers to the potential for financial or economic losses that arise from a disproportionate exposure to a single entity, industry, geographic region, or asset class. This means that if a particular investment, business operation, or economic activity experiences a downturn, the impact on the entity facing the concentration risk will be significantly amplified due to its heavy reliance on that specific area.

For example, a company that generates almost all of its revenue from a single product or from a very small number of major clients faces significant concentration risk. Similarly, an investment portfolio heavily weighted towards the stock of a single company or a specific sector, such as technology, is exposed to concentration risk. If that company or sector performs poorly, the overall value of the portfolio will be severely affected.

In a broader economic context, a country that relies heavily on the export of a single commodity, like oil, is vulnerable to concentration risk. Fluctuations in the global price of that commodity can have a drastic impact on the national economy.

Managing concentration risk involves diversification. By spreading investments, revenue streams, or business operations across a wider range of assets, industries, or markets, the potential impact of adverse events in any single area is reduced. Financial institutions and businesses actively monitor and manage their concentration risks to ensure stability and mitigate potential losses.