Systematic risk is associated with general factors: changes in interest rates, inflation, economic downturns, currency and political events. It affects all instruments simultaneously, so increasing the number of positions in a portfolio does not protect against it.
The opposite is specific risk, related to a particular issuer: poor management decisions, loss of a major client, production accident. It is reduced by diversification, since such events do not coincide across different companies.
This distinction explains why the market does not reward all risks. An investor can eliminate specific risk independently, so no premium is expected for it; expected returns are linked to accepting systematic risk, which cannot be eliminated.
It is managed not through diversification, but through portfolio structure: the share of defensive assets, instrument maturity, and alignment with investment horizon. During periods of market turbulence, liquidity decreases simultaneously across all instruments, and short-term borrowing costs rise—therefore, a buffer of liquid funds is part of managing this risk.