Why Is This Risk Not Present in Fiat-Backed Stablecoins?

The risk of the collateral value dropping below the stablecoin value is not present in fiat-backed stablecoins because their collateral is fiat currency, typically US Dollars, held in a bank account. Since the stablecoin is pegged 1:1 to the fiat currency, and the collateral is the same fiat currency, the collateral's value cannot fluctuate against the stablecoin's value.

The primary risk is instead the trustworthiness and solvency of the centralized issuer and the quality of their reserves.