Practice Free L5M2 Managing Supply Chain Risk Exam Questions Answers With Explanation

Explanation

a C grade = substantial risk. This is based on the grading system of AAA-D and is explained on p. 80. basically anything that isn't an A is bad.

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

Explanation

This is a 'swap' and is explained on p.94. This is a type of 'hedging' but there is no such thing as 'a hedge'. For a more in-depth look at Swaps see: https://www.mercatusenergy.com/blog/bid/77634/an-introduction-to-airline-fuel-hedging-strategies-swaps

Explanation

A black swan event is an unusual occurrence - something that is rare. See p.124

Explanation

The correct answers are 3 + 4. To mitigate the risk, you want to ensure price stability for the duration of the contract- you don't want the prices to keep going up and down. Therefore options 1 and 2 wouldn't help- the prices would still go up and down regardless of which currency was used for quotes. Using a forward contract, or fixing the exchange rate, however, would give price certainty, and therefore mitigate the risk. See p.23 for more information on currency risks and how to overcome these

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

Explanation

3 4 and 5 are the correct answers. This is from p. 79 of the textbook - each of these three areas is then covered in detail throughout chapter 2.2.

Explanation

SWOT is used for this. S + W is strengths and weaknesses, which are internal risks. O+T are opportunities and threats which are external risks. See p. 12 for more information

Explanation

Extended supply chains create logistic risks. This is from p. 29. Types of risks is a popular exam topic but the questions are usually quite straightforward like this.

Anything to do with currency is a financial risk.

Explanation

This is contribution. An example of this is if you have two insurance policies and are going on a business trip that is cancelled last minute. You can claim on the insurance the value of the trip- but only once. So you can either use one policy and not the other, or you can claim half the value of the trip on both policies. This stops people taking out multiple policies and then claiming on them all to make a profit. Legal Principles of Insurance is a known exam topic - this is from p.100-101 of the study guide

Explanation

changes to import levies is an external risk. Not internal. See p.118-119 for more information on internal risks - this is a popular exam topic. Internal risks are stuff that happens inside a company, external risks are risks from the external environment (whether this is political, economical, weather etc)

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.

Explanation

P. 133 of the study guide says 'it is also possible for organisation to use a quantative method where they quantify the loss in terms of monitory value instead of an impact figure'. Rating 1-5 is incorrect because this is the same as an impact scale. Impact analysis is wrong because this isn't quantative. 4Ts are the ways you can mitigate risks.

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.

Explanation

The correct answers are as follows:

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Explanation

The correct answers are as follows:

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Standardised payment terms would help with cashflow. For example every client must pay within 30 days.

Explanation

These are qualifications in business continuity. This comes from p.107 of the study guide. CBCI stands for Certificate of the Business Continuity Institute and DBCI Diploma of the Business Continuity Institute. Once you know what the acronyms stand for, the question is quite easy!

Explanation

Company D is the strongest. You want a company with high liquidity (this means they can easily pay any debts) and low gearing (meaning that their company isn't financed by debt). This question comes from p.24 of the CIPS study guide. It doesn't go into a lot of detail on financial ratios and gearing, as this was covered in Level 4. If you're rusty on financial ratios and gearing I recommend revising these before the exam.

Explanation

As a consultant he will need Professional Indemnity insurance. This insurance is for roles that include providing advice, designs and services. Insurances comes up a bit in the exam so revise this from p.96-100

Explanation

Contingency plans won't increase your profit, but they will do the other three things. This is from p.109-110 of the study guide

Explanation

0.5 - in probability theory, the likelihood of an event is represented as a number between 0 and 1. Therefore this would be written as 0.5. See p. 125

Explanation

This could be for cultural reasons within the company. P. 135 states that sometimes causes of risk are not recorded as this could lead to a blame culture within the company.

Explanation

The correct answers are as follows:

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Explanation

The correct answer is 'no-this is not the purpose of insurance'. The question asks if Professional Indemnity Insurance can be claimed on for this- no it can't- that's not its purpose. It would be Employer's Liability insurance which could be claimed on. This question tests your understanding of the different types of insurance. There is a very similar question in the exam- so remember accidents at work are claimed against Employer's Liability insurance NOT Professional Indemnity insurance - see p.96 for more information on different types of insurance

Explanation

Act is the final stage. See p.25 for a diagram of the cycle.

Explanation

This is the description of treat mentioned on p. 143. The 4 Ts is a popular exam topic

Explanation

An underwriter evaluates insurance applications. Learn the difference between Insurance Underwriters and Claims Adjusters for the exam - this is a known topic. (A claims adjuster determines the validity of an insurance claim).

Explanation

ISO 20400 is Sustainable Procurement. This is from p. 51 of the study guide- as well as learning what the ISO numbers are, do also learn the key areas of each ISO as these come up in the exam.

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