The market risk corresponds to an average interest rate in the market. This is exactly your opportunity cost if you invest in this company and do not invest your capital broadly in the market.
Not only the particular company itself, but also the industry in which credit customers operate influences the credit rating. Companies that operate in industries that are exposed to above-average risks are rated lower than companies that operate in industries with below-average risks.
Capital-intensive industries are rated at higher risk relative to industries of lower capital intensity with the same earnings.
Some raters rate industries with high competitive intensity as less risky and others as more risky. The former see corporate agility in competitive markets as mitigating risk, while others see competitive pressure as risk.
Example: If you expect an average 5% return on your investments if they are widely diversified in the market, that 5% minus base risk (0.1%) is market risk, or 4.9%.
Finally, you need to assess how much higher or lower the risk of the company under consideration is than the market risk. Then you get the specific company risk. The discount rate for the company risk corresponds to the market risk multiplied by the factor – by which the company under consideration is higher or lower risk.