CIPS L5M2 Managing Supply Chain Risk Exam Practice Test

Explanation

2 and 4 are correct. Audits should be unscheduled so that any issues can't be covered up in advance. Interviews with workers should also be conducted in private as this will allow them to speak their mind with confidence. Where interviews are conducted as a group there may be peer-pressure to say the correct thing. especially if there are managers around. see p.88 for information on Audits

Explanation

Trade secrets are used for recipes- they're suitable for confidential information that gives an organisation a competitive edge. For a detailed explanation of the four types of IP cover see p. 64 of the study guide

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

Separation of duties is a key component of the Sarbanes-Oxley Regulations. It ensures businesses are accounting responsibly, and one way to do this is through separation of duties (no one person has complete control of the accounts of a company). See https://www.investopedia.com/terms/s/sarbanesoxleyact.asp and p.42 in the study guide. This piece of legislation does tend to come up in the exam so do revise this topic.

Explanation

The correct answer is 'publish a summary of how the directors have engaged with employees'. For more information on this piece of legislation see p. 145

Explanation

Power and Legitimacy are part of the Stakeholder Salience Model - the third characteristic is Urgency. See p. 138

Explanation

The correct answers are reputational risks and geopolitical risks. This is according to p. 77 of the study guide. Although I personally feel this is a bit presumptive, painting all 'low-cost' countries with the same brush (are all 'low-cost countries' politically unstable and allow dodgy things that will affect your reputation?, this is what the textbook says ...

Explanation

Risk Management = ISO31000. Learn the ISOs for the exam as it's a popular exam topic. 31000 is explained on p. 140. As well as the numbers, you should also learn the guiding principles of each ISO for the exam.

Explanation

The correct answers are as follows:

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Explanation

quoting in Juan's currency would reduce the risk to Juan - the risk of currency exchange rate fluctuations would then sit with the supplier. See p.23 for more information on currency risks.

Explanation

A Disaster Recovery Plan is to get critical systems operational following an emergency. This is implemented hours after the event. Option 2 describes Incident Response and Option 3 describes a Business Continuity Plan. Option 4 is made up. These definitions and the timeline of when they're activated is on p.108 of the study guide

New technology (ie a new web portal or payment mechanism) would help treat this risk.

Explanation

The correct answers are as follows:

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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

Explanation

2 is the correct answer. Risk appetite is the level of risk that an individual or organisation is comfortable taking (p.4). Having a large risk appetite does not mean that you want to take every risk (as that would be irresponsible), rather, a large risk appetite means you're more likely to gamble and take calculated risks, even though they might not pay off. A small risk appetite would describe options 3 and 4 - taking few risks, or none at all.

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