Specific risk can be diversified out. E.g, you hold Nestle and Genting share in equal portion.

For argument sake, should Nestle being sued because the Ministry of Health found traces of Melamine in their Maggie Mee range. The price drops by 50%, but your Genting share will not be affected. That is call diversifiable risk aka specific risk.

Now, lets say, an earthquake happen and the Genting Resort and Nestle factory got severly damaged... both their stock falls by 50%, this is non-specific risk and you cannot diversify it. 

However you can diversified the the earthquake risk by say buying Nestle stock in Zurich stock exchange and Genting Singapore. So what happens in Malaysia will not volate your portfolio.

So, now we expand a little... lets say you buy a mutual fund consisting of 30 major stocks in Malaysia, another mutual fund that consist of 500 stocks in the US, and a bond fund consisting of Euro dominated bonds. Now you are seriously diversified and your portfolio risk is lesser than the individual asset class. Should Euro bond drops, your portfolio is supported by Malaysia stocks and vice-versa.

Should the unfortunate happen i.e., M'sia stock, US stocks and Euro bond drops simultaneously..... than it is called non-specific risk which you can do nothing about. But for that to happen is quite rare.