A systemic risk involves:

Systemic risk is defined as the risk of a widespread, cascading failure or collapse of an entire system, such as a financial market, an industry, or an economic system. It is triggered by an event or condition that causes a chain reaction of failures among interconnected entities. Unlike risks that are confined to a single organization, systemic risk threatens the stability and functionality of the whole system. The failure of one institution can lead to the failure of others, causing a major disruption that impacts the broader economy. This type of risk is characterized by its broad impact and the interconnectedness of the system's components.

A. This describes an internal contagion or cascading risk within a single organization, not the failure of an entire external market or system.
B. This is a significant supply chain risk that is specific to one organization, not a disruption affecting the function of an entire market.
C. This is a form of operational or human resource risk (key-person risk) that is internal and specific to a single organization.

1. International Monetary Fund (IMF). (2009). Global Financial Stability Report: Navigating the Financial Challenges Ahead. World Economic and Financial Surveys. In Chapter 3, "Assessing Systemic Risks," systemic risk is defined as "a risk of disruption to financial services that is (i) caused by an impairment of all or parts of the financial system and (ii) has the potential to have serious negative consequences for the real economy." (p. 81). This aligns directly with the concept of a major disruption to an entire system.

2. De Bandt, O., & Hartmann, P. (2000). Systemic Risk: A Survey. European Central Bank, Working Paper No. 35. The paper defines systemic risk as "the risk that the failure of a participant to meet its contractual obligations may in turn cause other participants to default with a chain reaction leading to broader financial difficulties." (p. 5). This supports the idea of a cascading failure within an entire system.

3. Lo, A. W. (2008). Hedge Funds, Systemic Risk, and the Financial Crisis of 2007-2008: Written Testimony for the House Oversight Committee Hearing on Hedge Funds. MIT Sloan School of Management. Lo defines systemic risk as "the risk of a cascade of failures that can overwhelm an entire system." This definition clearly distinguishes it from localized or organizational-specific risks. (p. 2). Available via MIT DSpace.