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The risk inherent to the entire market or market segment that cannot be eliminated through diversification, also called market risk or non-diversifiable risk.
Systematic risk affects all securities in the market and includes factors like interest rate changes, recessions, wars, pandemics, and inflation. During the 2008 financial crisis, virtually all stocks declined regardless of their individual fundamentals. Beta measures a stock's sensitivity to systematic risk. Since systematic risk cannot be diversified away, investors are compensated for bearing it through the equity risk premium (the extra return stocks offer over risk-free bonds). This is a central insight of CAPM: the market does not reward you for taking risks that could have been diversified away (unsystematic risk).