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A risk manager at a local bank is discussing the concepts of expected and unexpected loss with a risk analyst. The risk manager points out that unexpected losses can sometimes result from unknown or uncertain risks, or risks that are difficult to quantify. The analyst asks about ways to assess and manage these risks. Which of the following is a correct statement for the manager to make?
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.