DUMPS BASE EXAM DUMPS CIPS L5M2 28% OFF Automatically For You Managing Supply Chain Risk 1.Which of the following will you put into box 1? A. transfer B. treat C. tolerate D. terminate Answer: A Explanation: The correct answers are as follows: Table Description automatically generated Nothing can be done to change this risk (you can't stop an earthquake from happening), so you therefore need to transfer the risk to another party, or include for this within a contract. 2.Zara is a procurement manager who is thinking about working with a new supplier to source buttons for her clothes manufacturing business. Her manager has asked her to do some due diligence on the supplier's financial stability. What should she do? A. use an outsourced third-party credit rating agency B. use an outsources third-party risk management consultant C. conduct a credit check on the supplier based on the information provided by them in the tender D. conduct a risk assessment based on the information provided by the supplier in the tender Answer: A Explanation: She should use a credit rating agency for this. She should not do this herself as she won't have access to accurate information like an agency will. The supplier may not have been truthful in their tender. For information on Credit Rating Agencies see p.79 3.Which of the following will you put into box 8? A. new technology B. forward contract C. outsource [2023] CIPS L5M2 Dumps V8.02 - Effective L5M2 Exam Preparation D. insurance Answer: B Explanation: Table Description automatically generated A forward contract would fix the exchange rate at a certain level, allowing for cost certainty. This mitigates the risk of the currency getting any weaker. 4.Petra Ltd is a manufacturer of upmarket baked goods and they have a range which is gluten free and therefore suitable for customers who have an intolerance of wheat. For this reason Petra Ltd is very strict about the ingredients that it sources. It's main supplier has provided written agreement that they will test all ingredients in their processing factory to ensure that they are suitable for the gluten free diet before delivery is made, and once delivery is made the materials will be deemed accepted by the buyer. Is Petra right to accept this arrangement? A. yes- this reduces the risk of unsuitable materials entering Petra's factory B. yes- this arrangement places the risk on the supplier rather than Petra C. no- Petra should arrange for additional tests to be conducted on the deliveries and only accept them once these tests have been completed D. no - this arrangement is unacceptable and Petra should void the contract Answer: C Explanation: Petra should arrange for additional tests to be conducted. This question is based on a real example in the exam. In this scenario there is still significant risk for Petra even if the supplier is testing the materials. The supplier could miss something, or forge the results with disastrous consequences for Petra's customers. Moreover it would severely damage Petra's reputation. Therefore the wise thing would be for Petra to conduct additional tests in-house to ensure they are happy with the products and only then accept them. This could be an audit of 10% of deliveries to ensure compliance. Acceptance Testing is discussed in the textbook on p.70 5.Which of the following will you put into box 6? [2023] CIPS L5M2 Dumps V8.02 - Effective L5M2 Exam Preparation A. new technology B. forward contract C. outsource D. insurance Answer: D Explanation: Table Description automatically generated The company should ensure they have the correct levels of Employer's Liability insurance as staff are getting injured. This transfers the risk to the insurance company. (I mean they should probably do something to stop the staff getting hurt too... but this is just an imaginary example question....) 6.John is a mid-level manager and has created a risk / reward matrix about four potential opportunities at his company White Ducky Limited. He will present his research to a board meeting next week. He has categorised the four opportunities as the following. Which of these opportunities should John recommend the board 'consider'? Select TWO. A. low risk / high reward B. high risk/ high reward C. low risk/ low reward D. high risk/ low reward Answer: B,C Explanation: High risk/ high reward, and low risk/ low reward are the options that should be CONSIDERED. This is according to the risk/ reward matrix on p. 6. Items that are low risk/ high reward should be PROGRESSED and items which are high risk / low reward should be AVOIDED. 7.Risk should be a 'golden thread' that links all of the organisation's strategies, communications, policies and training. The LILAC model describes how a risk-aware culture can be created. Which of the following form part of the LILAC model? [2023] CIPS L5M2 Dumps V8.02 - Effective L5M2 Exam Preparation A. Leadership and Learning B. Investment and Accountability C. Appraisal and Communication D. Learning and Information Answer: A Explanation: The LILAC Model is; Leadership, Involvement, Learning, Accountability and Communication. P. 149 8.In an organisation, who is responsible for creating a risk assessment register? A. the CEO B. Procurement Manager C. Risk Manager / H+S Manager D. Cross-Functional Team Answer: D Explanation: A Cross Functional Team should create a risk register. It shouldn't be the responsibility of one person to do this- more points of view will lead to more risks being identified. Accountability for the Risk Register may however sit with the CEO or a Department Manager. This is explained on p. 132 9.Which of the following will you put into box 5? A. CSR Policy B. Quote in Buyer's Currency C. Force Majeure D. Standardise Payment Terms Answer: A Explanation: The correct answers are as follows: Table Description automatically generated CSR= Corporate Social Responsibility [2023] CIPS L5M2 Dumps V8.02 - Effective L5M2 Exam Preparation 10.Oliver is a procurement manager and he is trying to work out the likelihood that a supplier fails to deliver to the warehouse two days in a row. Which of the following methodologies should Oliver use? A. value at risk B. normal distribution C. binomial distribution D. Poisson Distribution Answer: D Explanation: Poisson Distribution would be used for this. Poisson Distribution predicts the likelihood of an event occurring. This is explained on p. 129 of the study guide but this YouTube video explains it a lot better: https://www.youtube.com/watch?v=zA7fp2s7FlM 11.Which of the following form part of the Stakeholder Salience Model? Select TWO A. power B. legitimacy C. interest D. level E. attitude Answer: A Explanation: Power and Legitimacy are part of the Stakeholder Salience Model - the third characteristic is Urgency. See p. 138 12.What would happen if a company enacts its Contingency Agreement following a natural disaster? A. they will receive a financial pay-out B. they will receive operational help from a third party C. they will be able to claim on insurance D. they will be able to breach any contracts that it has Answer: B Explanation: They will receive operational help from a third party is the correct answer. Unlike insurance, a contingency plan provides operational help, not just financial. This could be in providing an emergency workspace, helping to get IT systems back up and running or providing emergency air freight. This is explained on p.91-92 of the study guide 13.Risk Management is a process with several steps. [2023] CIPS L5M2 Dumps V8.02 - Effective L5M2 Exam Preparation Which of the following is the last step of the cycle? A. identify risks B. treat C. monitor and review D. communicate and consult Answer: C Explanation: monitor and review is the last stage. The full cycle is; establish context - identify risks - analyse and evaluate risks - treat -communicate and consult - monitor and review. See p. 142 14.Which of the following are benefits of ISO28000? Select TWO. A. competitive advantage B. cost saving C. increased market share D. decreased legal costs Answer: A,B Explanation: Advantages of ISO28000 are competitive advantage and cost savings. The textbook explains that cost savings come through a reduction in security incidents. For more info on ISO28000 see p. 141 15.Which of the following will you put into box 5? A. CSR Policy B. Quote in Buyer's Currency C. Force Majeure D. Standardise Payment Terms Answer: B Explanation: The correct answers are as follows: Table Description automatically generated Cashflow issues can lead to serious financial problems and the company going bust. Therefore this risk must be treated. [2023] CIPS L5M2 Dumps V8.02 - Effective L5M2 Exam Preparation 16.What is ISO28000? A. Risk Management B. Supply Chain Security C. Quality Management D. Sustainable Procurement Answer: B Explanation: ISO 28000 is Supply Chain Security Management. This is a known topic for the exam. Learn more about ISOs on p. 141 17.Which of the following statements is true about ISO9001? Select TWO. A. it is based on the principle of continuous improvement B. it encourages businesses to see quality from the viewpoint of the customer C. it aims to ensure sustainability within the supply chain D. It complements ISO 20400 E. it helps businesses to identify areas of potential risk and mitigate these accordingly Answer: A,B Explanation: ISO 9001 is Quality Management- answers 1 and 2 are correct. ISOs are a popular topic on this exam so be sure to revise them - and not only what the names of them are, but also the principles behind each ISO. ISO 9001 is discussed on p. 25 of the CIPS study guide. 18.In which of the following industries is it common to find dedicated resource for risk management? A. banking and insurance B. agriculture C. manufacturing D. the public sector Answer: A Explanation: Banking and Insurance industries usually have a dedicated resource. This mean people working within the company are dedicated to this role (as opposed to using a third party). P. 146 19.Which of the following risks would likely be tolerated by a company? A. no risks should be tolerated B. opportunities which are low risk and low impact [2023] CIPS L5M2 Dumps V8.02 - Effective L5M2 Exam Preparation C. opportunities which are low risk and high impact D. opportunities which are high risk and low impact Answer: B Explanation: Low risk and low impact should be tolerated. This is from the Probability and Impact Matric from p.122. The other two options should be either transferred or treated. 20.Fraud committed by an employee within a business is what type of risk? A. internal risk B. external risk C. procurement risk D. economic risk Answer: A Explanation: This is an internal risk. A procurement risk would be issues with a supplier or contract, and economic risk would be exchange rate fluctuations etc. See p.118 for more information on internal risks- it's a known exam topic 21.Which of the following statements is true about a Disaster Recovery Plan? Select TWO A. it is held at the top level B. it contains more detail than a business continuity plan C. the focus is to return a company to making a profit after a disaster D. it can be structured using a standardised framework Answer: B,D Explanation: Answers 2 and 4 are correct. A Business Continuity Plan is held at the top level, not a disaster recovery plan. This can be held at the department level- or whoever would have the ability to enact this if a disaster were to happen. A company is likely to have several Disaster Recovery Plans for different departments and different scenarios so several people within the organisation may be accountable for these. Option 3 is incorrect as the focus is on recovering systems (e.g. getting people back online) not on profit. P.155 22.Which of the following will you put into box 7? A. new technology B. forward contract C. outsource D. insurance Answer: C [2023] CIPS L5M2 Dumps V8.02 - Effective L5M2 Exam Preparation Explanation: Table Description automatically generated 23.Company X is a large manufacturer of cosmetics and household products. It operates in 57 different countries and has large and complex supply chains. The brand's popularity is partly due to the cheap price of the products compared with its competitors and Company X has recently discovered that child labour has been used within its supply chain. In response to this Company X has donated a large amount of money to charity. What is this an example of? A. corporate social responsibility B. greenwashing C. triple bottom line thinking D. business continuity planning Answer: B Explanation: This is Greenwashing. Greenwashing is the process of using a good deed to cover up unethical responsibility. See p. 45. In this example Company X has thrown some money at a charity in order to cover up the fact it has child labour issues within the supply chain. See https://en.wikipedia.org/wiki/Greenwashing 24.Yusef is a new procurement manager at FRD Incorporated. He is looking through the Risk Assessments for his department and notices that the cause of the risk is not identified. Why might this be? A. this is a mistake - all risk assessments should specify the cause of the risk. He should raise this with his manager B. the organisation has a high risk appetite C. the organisation has not recorded cause for cultural reasons D. the organisation has completed the risk assessments incorrectly Answer: C Explanation: This could be for cultural reasons within the company. P. 135 states that sometimes [2023] CIPS L5M2 Dumps V8.02 - Effective L5M2 Exam Preparation causes of risk are not recorded as this could lead to a blame culture within the company. 25.Which of the following will you put into box 5? A. audit B. monitor C. insurance D. dual sourcing Answer: B Explanation: The correct answers are as follows: Table Description automatically generated with low confidence 26.Dave is a procurement manager for a chocolate factory who is running a tender to source cocoa from a new supplier. The tender is a huge opportunity for suppliers and the contract would be worth millions of pounds. Dave has passed some information about the tender to one of the bidders in exchange for a free holiday to Barbados. Which of the following types of fraud has Dave committed? A. holiday fraud B. accepting a kick-back C. counterfeiting D. bribery Answer: D Explanation: This is an example of bribery. The trip to Barbados is the bribe. For more information on these types of fraud see p.19 27.Which of the following statements are true about risk management? Select TWO. A. the goal of risk management is to reduce risks to 0 B. risk management is a continuous process C. risk management is an activity that is conducted by a business once a year D. risk management can help companies ensure the smooth and successful running [2023] CIPS L5M2 Dumps V8.02 - Effective L5M2 Exam Preparation of purchase and supply operations E. risk management is the process by which all risks are either treated or transferred Answer: B,D Explanation: The correct responses are 2 and 4: risk management is a continual process and helps companies ensure the smooth and successful running of P+S. These are direct quotes from p.3 of the study guide. The other answers are wrong- if risk management is a continuous process it's not something that is done once a year- so this option is automatically discounted. Option 1 is also wrong as you can never reduce all risks to 0, and option 5 is also wrong- risks can be treated and transferred, but they can also be tolerated and terminated. 28.Chloe is a procurement manager at Ruby Company. She has been asked to join a cross-functional team to review the company's risk appetite, potential risks within the supply chain and brainstorm mitigating actions. Chloe has suggested that the cross- functional team should first draw up a list of potential supply chain risks and potential strategies to overcome the risks. Is Chloe correct? A. yes- the first thing the team should look at are the risks and categorise these by topic B. yes- the team should focus on creating a risk register and strategies for mitigating risks as quickly as possible C. no- the team should review the company's risk appetite before creating a risk register D. no- Chloe should first speak with suppliers before drawing up the list of potential supply chain risks Answer: C Explanation: The correct answer is 3 'no- the team should review the company's risk appetite before creating a risk register'. This questions tests to see if you understand what risk appetite is and when this should be reviewed. Risk appetite is the first stage in developing any plan as it will influence the next stages. For example if the company has a large risk appetite, this would affect how they would classify risks and what mitigating actions they would take. Risk appetite is explained in chapter 1.1 (p.4) but it also comes up in Learning Outcome 3 29.Leo LLP is a company which sources materials internationally, and then sells these on nationally at a small margin. Leo LLP has noted that there is a risk of exchange rate fluctuations making their purchases unviable. The CFO has declared that the only way to mitigate this risk is via hedging and that they should look at price fixing. is this correct? [2023] CIPS L5M2 Dumps V8.02 - Effective L5M2 Exam Preparation A. yes- hedging is the only solution to mitigate the risk of adverse price movements B. yes- this reduces the risk to 0 C. no- Leo LLP could do nothing and increase its prices instead D. no- Leo LLP can take out insurance to mitigate this risk Answer: C Explanation: The correct answer is 3 'no Leo LLP could do nothing and increase its prices instead'. Firstly the CFO is wrong. There are other ways to mitigate this risk than hedging- hedging isn't the ONLY thing you can do. Therefore you automatically need to discount options that begin with yes. Then looking at the options that begin with no, insurance isn't going to help in this situtation. Therefore, by process of elimination you will be left with 'no Leo LLP could do nothing and increase its prices instead'. This question is taken from p.95 - there is a section here describing alternatives to hedging. When dealing with currency fluctuations, an alternative to fixing a price is to build in a margin on your own prices. This margin acts as a buffer for if prices go up- your price can remain the same. Other alternatives to hedging suggested by CIPS include; negotiating long term contracts, buying out the supplier and ingredient substitution 30.Which of the following will you put into box 3? A. hazard B. financial C. strategic (Correct) D. operational Answer: C Explanation: An aging workforce is a strategic risk for the business. 31.Which of the following stages would come first within a risk assessment? A. evaluate risk B. treat risk C. monitor risk D. analyse risk Answer: D [2023] CIPS L5M2 Dumps V8.02 - Effective L5M2 Exam Preparation Explanation: analyse is the correct answer. The full process is: establish context- identify- analyse - evaluate - treat - monitor and review. This is from p.122 32.Which of the following will you put into box 2? A. transfer B. treat C. tolerate D. terminate Answer: B Explanation: The correct answers are as follows: Table Description automatically generated Cashflow issues can lead to serious financial problems and the company going bust. Therefore this risk must be treated. 33.Which of the following are factors which can lead to a supplier becoming insolvent? Select THREE A. fraudulent activity B. attrition of key employees C. uncontrolled expenditure D. increased market share E. a high financial ratio Answer: A,B,C Explanation: 1 2 and 3 are factors which can lead to a supplier becoming insolvent. 4- increased market share is a good thing, as it indicates the supplier is doing better than their rivals. A high financial ratio is also a good thing as it shows they have more assets than debt - so this is not a sign of insolvency. See p.24 for 'Supplier Risks' 34.A black swan event is what type of occurrence? A. an occurrence with a good outcome [2023] CIPS L5M2 Dumps V8.02 - Effective L5M2 Exam Preparation B. an occurrence with a negative outcome C. a common occurrence D. an unusual occurrence Answer: D Explanation: A black swan event is an unusual occurrence - something that is rare. See p.124 35.Which of the following statements about binomial distribution are true? Select THREE A. there are only two outcomes B. they are based on continuous events C. there is only one outcome per event D. each trial has the same probability E. the events of one trial will impact on the next one Answer: A,C,D Explanation: 1, 3 and 4 are the correct options. Binomial is based on discreate events not continuous and it assumes the events of each trial are independent of one another. This YouTube video explains it all perfectly using the chance that an ice-cream cone is broken. It's a nice memorable example to help you remember what binomial distribution is and how it works: https://www.youtube.com/watch?v=3EZbX2ftCUk - it's a very memorable example and really helped me. You can also see more info in the cips textbook p.131 36.Which of the following are key areas of ISO 26000 Social Responsibility? Select THREE. A. organisational governance B. quality management C. human rights D. consumer issues E. efficient systems Answer: A,C,D Explanation: 1 3 and 4 are the correct answers. There are 7 key areas that ISO 26000 focuses on. As well as these three, there is also labour practices, the environment, fair operating practices and community involvement. See p. 51 of the study guide. ISOs are a popular exam topic so do revise these before the exam. [2023] CIPS L5M2 Dumps V8.02 - Effective L5M2 Exam Preparation GET FULL VERSION OF L5M2 DUMPS