Idiosyncratic risk is best defined as:

Idiosyncratic risk is best understood as the risk that is unique to a specific asset or company. This type of risk arises from factors that affect the individual company rather than the broader market or industry. Examples of idiosyncratic risk include company management decisions, product recalls, or changes in competitive advantage.

This is in contrast to systematic risk, which impacts the entire market, such as economic downturns or interest rate changes, and cannot be mitigated through diversification. Idiosyncratic risk, however, can often be reduced by diversifying a portfolio, as not all companies will experience similar events at the same time. Understanding this distinction is crucial for investors and analysts who aim to assess and manage various types of risks in their investment portfolios.