Ultimate Guide to Prepare L5M2 with Accurate PDF Questions [Feb 25, 2023]
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NEW QUESTION 67
Kevin is a consultant who works for himself and is predominantly based at home, except for when he visits clients. He has recently taken on a role advising a client about the feasibility of building a new railway station in a village. Which of the following insurances would be vital for Kevin to take out?
- A. public liability
- B. professional indemnity
- C. product liability
- D. trade credit
Answer: B
Explanation:
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
NEW QUESTION 68
Which of the following will you put into box 2?
- A. operational
- B. financial
- C. hazard
(Correct) - D. strategic
Answer: C
Explanation:
Explanation
Table Description automatically generated
NEW QUESTION 69
Which of the following will you put into box 2?
- A. operational
- B. intellectual property
- C. environment
- D. strategic
Answer: C
Explanation:
Explanation
The correct answers are as follows:
Table Description automatically generated
NEW QUESTION 70
Which of the following models would be used to explore internal and external risks to a business?
- A. SWOT
- B. STEEPLE
- C. Poisson Distribution
- D. Porter's 5 Forces
Answer: A
Explanation:
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
NEW QUESTION 71
In an organisation, who is responsible for creating a risk assessment register?
- A. Cross-Functional Team
- B. the CEO
- C. Procurement Manager
- D. Risk Manager / H+S Manager
Answer: A
Explanation:
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
NEW QUESTION 72
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. Poisson Distribution
- B. value at risk
- C. normal distribution
- D. binomial distribution
Answer: A
Explanation:
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
NEW QUESTION 73
Juan is a Spanish business owner who imports several parts from Japan. Juan's business operates in Euros and the parts that he buys from Japan can often take a long time to arrive, this means that the price of the items sometimes fluctuates due to the exchange rate. Which of the following would be the best option for Juan?
- A. have the supplier match geographical profiles of customer sales with supplier purchases
- B. terminate the contract with the foreign supplier
- C. have the supplier quote in their own currency
- D. have the supplier quote in Juan's currency
Answer: D
Explanation:
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.
NEW QUESTION 74
Which of the following risks is associated with sourcing from low-cost countries? Select TWO:
- A. operational risks
- B. reputational risks
- C. geopolitical risks
- D. financial risks
Answer: B,C
Explanation:
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 ...
NEW QUESTION 75
Which of the following is a method for approaching risks?
- A. tolerate
- B. transport
- C. take out
- D. translate
Answer: A
Explanation:
Explanation
Tolerate is one of the 4 Ts. This is a popular exam question so do learn the 4 Ts: Tolerate, Treat, Transfer and Terminate. See p.32.
NEW QUESTION 76
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. no- Leo LLP can take out insurance to mitigate this risk
- C. yes- this reduces the risk to 0
- 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 77
Which of the following will you put into box 6?
- A. forward contract
- B. outsource
- C. insurance
- D. new technology
Answer: C
Explanation:
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....)
NEW QUESTION 78
Which of the following are benefits of ISO28000? Select TWO.
- A. competitive advantage
- B. decreased legal costs
- C. increased market share
- D. cost saving
Answer: A,D
Explanation:
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
NEW QUESTION 79
Which of the following is not a benefit of having a contingency plan?
- A. competitive advantage
- B. increased profits
- C. greater resilience to force majeure events
- D. increased staff morale
Answer: B
Explanation:
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
NEW QUESTION 80
Which of the following is an internal risk for a company?
- A. supplier's factory burns down
- B. exchange rate fluctuations
- C. government policy changes
- D. lack of available personnel
Answer: D
Explanation:
Explanation
Lack of personnel is an internal risk- the others are external risks. Internal and external risks is a known topic for the exam so see p.116-117 for more information
NEW QUESTION 81
Who takes ownership for a Business Continuity Plan?
- A. the top level of an organisation
- B. the department head
- C. the risk champion of the company
- D. the individuals who identify the risks
Answer: A
Explanation:
Explanation
A Business Continuity Plan is held at the top level. See p. 155
NEW QUESTION 82
Which of the following will you put into box 1?
- A. financial
- B. operational
- C. hazard
- D. strategic
Answer: B
Explanation:
NEW QUESTION 83
Which organisation created the Decent Work Agenda?
- A. ISO
- B. ILO
- C. ETI
- D. UN
Answer: B
Explanation:
Explanation
This is from ILO- the International Labour Organisation - see p.49 of the textbook. You should recognise all four of these acronyms as they come up in this module UN= United Nations - they have the Guiding Principles, ISO = produce standards for business practices and ETI = Ethical Trading Initiative - they have a base code for labour practices.
NEW QUESTION 84
What is the purpose of the Sarbanes-Oxley Regulation?
- A. to ensure that products that reach the market are fit for purpose
- B. to ensure high levels of ethical practice with regards to working conditions
- C. to protect the environment
- D. to encourage transparency in financial reporting
Answer: D
Explanation:
Explanation
Sarbanes Oxley Regulations encourages transparency in financial reporting. The regulations came in response to the Enron scandal in 2001 when Enron bosses were falsifying financial records to make the company look better than it was, then the company went bust. The point of Sarbanes Oxley is to ensure that this doesn't happen again- that business leaders report correct financial statements to shareholders. The study guide talks about this on p.42 but I'd recommend also watching this video as it gives a good background to the regulation:
https://www.investopedia.com/terms/s/sarbanesoxleyact.asp
NEW QUESTION 85
What is the job of an underwriter?
- A. to evaluate insurance applications
- B. to advise required insurance levels for a contract
- C. to determine the validity of an insurance claim
- D. to assist a buyer in selecting the correct insurance
Answer: A
Explanation:
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).
NEW QUESTION 86
Standard Deviation is the measure of the variation between the values in a range of data. From which of the following could you calculate Standard Deviation?
- A. poisson distribution
- B. normal distribution
- C. value at risk
- D. binomial distribution
Answer: B
Explanation:
Explanation
This is calculated from normal distribution. In normal distribution most of the values are concentrated around the middle of the data set- standard deviation identifies how far a data point is from this average. See p.128 for more information
NEW QUESTION 87
SA 8000 is an alternative to which ISO?
- A. 0
- B. 1
- C. 2
- D. 3
Answer: C
Explanation:
Explanation
SA8000 is Social Accountability, this is an alternative to ISO 20400 which is Sustainable Procurement. This is explained on p.53 of the study guide. ISOs are a popular exam topic, so ensure you know these four mentioned here before the exam
NEW QUESTION 88
Fudgylicious Inc is a manufacturer of confectionary based in the United Kingdom. In one of its factories an employee has an accident during his shift which resulted in him breaking a leg and requiring surgery. Will the employer's Professional Indemnity insurance cover the cost of the operation?
- A. yes- the insurance can be used as the accident occurred on the company's premises
- B. no- the insurance would not cover the cost of surgery, only for lost wages if he is unable to work
- C. no- this is not the purpose of insurance
- D. yes- the insurance will cover all medical expenses as the accident occurred during his working hours
Answer: C
Explanation:
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
NEW QUESTION 89
Which of the following insurances would provide cover in the eventuality that your supplier's place of business flooded and this affected your deliveries?
- A. public liability insurance
- B. contingent business interruption insurance
- C. property insurance
- D. business interruption insurance
Answer: B
Explanation:
Explanation
This is 'contingent business interruption' insurance. This protects you if anything were to happen to your suppliers' premises. Business Interruption Insurance would cover you if something were to happen to your premises. See p.99
NEW QUESTION 90
In an emergency situation, put the following phases into chronological order as to when they would be activated 1) disaster recover plan 2) incident response 3) business continuity plan
- A. 3, 1, 2
- B. 2, 1, 3
- C. 1, 2, 3
- D. 1, 3, 2
Answer: B
Explanation:
Explanation
The correct order is 2, 1, 3 - this is from p.108 of the study guide: 'The Components of a Business Continuity and Disaster Recovery Plan'.
NEW QUESTION 91
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 outsources third-party risk management consultant
- B. conduct a risk assessment based on the information provided by the supplier in the tender
- C. use an outsourced third-party credit rating agency
- D. conduct a credit check on the supplier based on the information provided by them in the tender
Answer: C
Explanation:
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
NEW QUESTION 92
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