A company runs thousands of Amazon EC2 instances that are based on the Amazon Linux...

Comprehensive and Detailed Explanation From Exact Extract of AWS CloudOps Documents:

The most operationally efficient solution is C because AWS Systems Manager Session Manager is purpose-built for secure, auditable interactive access to EC2 instances at scale—without managing bastion hosts or distributing SSH keys. Session Manager can be configured to log session activity, including commands and output, to durable destinations such as Amazon CloudWatch Logs (and optionally Amazon S3). This directly satisfies the requirement to record interactive sessions and store logs durably.

For automated notifications and alarms, CloudWatch Logs supports metric filters that transform matching log patterns into CloudWatch metrics. Those metrics can then drive CloudWatch alarms and notifications (for example, via Amazon SNS). This is a standard CloudOps pattern: centralize logs, derive metrics from security-relevant patterns, and alert automatically.

Option A and D require installing and operating agents and building a more complex analytics path (Athena queries for alerting), which is less efficient and introduces more moving parts across thousands of instances. Option B adds a bastion host dependency that becomes an operational burden (scaling, patching, hardening, HA) and a potential choke point. Session Manager reduces these burdens by using SSM Agent already installed, IAM-based access control, and centralized logging/monitoring integrations.