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During a detailed discussion about the concepts of expected loss and unexpected loss, a risk manager points out to a risk analyst at a local bank that unexpected losses can sometimes arise from certain risks that are either not well understood or are characterized by uncertainty, making them difficult to measure accurately. The analyst seeks to understand the techniques available for assessing and managing these types of unpredictable risks.
A
Unknown risks may be estimated but are typically impossible to manage.
B
Unknown risks may exist in various risk types but are typically minor and inconsequential.
C
Risk managers should treat unknown risks in the same way as those risks that can be quantified.
D
A risk manager's confidence in the estimate of a risk measure should affect the application of that estimate in the decision-making process.