I have frequently used a picture in my presentations regarding total beta showing a lone tree on one edge of a river bank in the foreground along with a picture of a forest on the opposite side of the river bank. I use this to show that the company-specific risk or maybe more appropriately the hurricane-specific risk faced by that lone tree is greater than if it was still part of the (well-diversified) forest (portfolio). So, the analogy is that an undiversified investor (lone tree) faces more risk in a particular company and, therefore, requires a higher rate of return than a well-diversified investor (forest).
I see that coincidentally Home Depot has become very well prepared to combat hurricane-specific risk. For example, many HD stores lie in harm’s way along the gulf coast. When a storm is detected, HD opens a command center. HD also tries to be the last retailer to close in anticipation of the storm and the first to re-open (while the command center stays open from 7AM to midnight). Stores re-open and the field teams assess what the area needs most (flash lights, lumber, etc.). In fact, HD may open temporary stores.
Thus, HD has planned for the known risks of the region. The question remains for the entrepreneur if he/she has planned for the risks facing his/her company as well as HD has in the Gulf Region?