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CIPS Managing Supply Chain Risk Sample Questions (Q54-Q59):

NEW QUESTION # 54
Kieran works in the manufacturing industry and his company have just implemented LEAN production processes. Will this increase or decrease the risks in relation to security of supply?

  • A. increase security of supply risks as there is less buffer stock held on site
  • B. decrease security of supply risks as there will be increased efficiencies
  • C. increase security of supply risks as this is a tried and tested risk reducing process
  • D. decrease security of supply risks as there is less buffer stock

Answer: A Explanation:
Explanation
2 'increase security of supply risks as there is less buffer stock held on site' is the correct answer. With Lean manufacturing there is little or no buffer stock held. This means that if a supplier doesn't deliver on time, the whole manufacturing process will have to come to a stop until new supplies arrive. A risk of Lean Manufacturing is that you become too reliant on suppliers, and if there is a scarcity of resources or an issue with the supply chain, you are more exposed. See p.26-27 for more information on Security of Supply Risks.
NEW QUESTION # 55
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?

  • 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 can take out insurance to mitigate this risk
  • D. no- Leo LLP could do nothing and increase its prices instead

Answer: D Explanation:
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
NEW QUESTION # 56
Which of the following statements is true about ISO9001? Select TWO.

  • A. it helps businesses to identify areas of potential risk and mitigate these accordingly
  • B. it is based on the principle of continuous improvement
  • C. it encourages businesses to see quality from the viewpoint of the customer
  • D. it aims to ensure sustainability within the supply chain
  • E. It complements ISO 20400

Answer: B,C Explanation:
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.
NEW QUESTION # 57
Which of the following will you put into box 8?

  • A. insurance
  • B. new technology
  • C. outsource
  • D. forward contract

Answer: D Explanation:
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.
NEW QUESTION # 58
A large multi-national corporation has just been awarded a credit rating of C by the three main credit rating agencies. What does this score signify?

  • A. substantial risk
  • B. low risk
  • C. average risk
  • D. in default

Answer: A 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.
NEW QUESTION # 59
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Free PDF L5M2 - Trustable Managing Supply Chain Risk Exam Vce Format

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