CIPS Level 5 Advanced Diploma in Procurement and Supply L5M2 Real Exam Questions and Answers FREE Updated on Jan 11, 2023
L5M2 Ultimate Study Guide - ExamPrepAway
NEW QUESTION 33
Which of the following will you put into box 4?
- A. strategic
(Correct) - B. hazard
- C. operational
- D. financial
Answer: D
Explanation:
Explanation
Anything to do with currency is a financial risk.
NEW QUESTION 34
Which of the following statements is true about ISO9001? Select TWO.
- A. it aims to ensure sustainability within the supply chain
- B. it helps businesses to identify areas of potential risk and mitigate these accordingly
- C. it encourages businesses to see quality from the viewpoint of the customer
- D. it is based on the principle of continuous improvement
- E. It complements ISO 20400
Answer: C,D
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 35
Which of the following will you put into box 1?
- A. treat
- B. terminate
- C. transfer
- D. tolerate
Answer: C
Explanation:
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.
NEW QUESTION 36
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 arrangement places the risk on the supplier rather than Petra
- B. no - this arrangement is unacceptable and Petra should void the contract
- C. yes- this reduces the risk of unsuitable materials entering Petra's factory
- D. no- Petra should arrange for additional tests to be conducted on the deliveries and only accept them once these tests have been completed
Answer: D
Explanation:
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
NEW QUESTION 37
The UK Companies (Miscellaneous Reporting) Regulations 2018 states that organisations with more than 250 employees must do what?
- A. Publish a summary of how directors have engaged with employees
- B. Publish an Anti-Slavery Policy
- C. Demonstrate how they abide by Environmental practices
- D. Provide an annual financial statement
Answer: A
Explanation:
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
NEW QUESTION 38
Envy Manufacturing has several factories located in countries with poor reputations for human rights. It is concerned about potential risks of child labour being used within the supply chain. Envy Manufacturing has therefore decided to enlist the support of a third party auditing company to audit its factories. How should these audits be conducted? Select TWO
- A. conduct group interviews with workers to ensure that all voices are heard
- B. conduct on the spot visits with no warning
- C. conduct private meetings with a selection of workers
- D. organised well in advance to allow the factory managers to prepare for the audit
Answer: B,C
Explanation:
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
NEW QUESTION 39
Which of the following will you put into box 1?
- A. intellectual property
(Correct) - B. strategic
- C. environment
- D. operational
Answer: A
Explanation:
Explanation
The correct answers are as follows:
Table Description automatically generated
NEW QUESTION 40
Which of the following is an internal risk for a company?
- A. exchange rate fluctuations
- B. supplier's factory burns down
- C. lack of available personnel
- D. government policy changes
Answer: C
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 41
Which of the following will you put into box 2?
- A. terminate
- B. tolerate
- C. treat
- D. transfer
Answer: C
Explanation:
Explanation
The correct answers are as follows:
Table Description automatically generated with low confidence
NEW QUESTION 42
According to Kid Sadgrove, fraud can take place when four pre-conditions exist. Which of the following is not one of those pre-conditions?
- A. attractive assets
- B. opportunity
- C. motive
- D. access
Answer: D
Explanation:
Explanation
access is not a pre-condition. The other three are. The fourth pre-condition not mentioned is lack of controls.
This is from p.20 of the study guide
NEW QUESTION 43
An indemnity clause should contain which of the following pieces of information 1) duties of both parties 2) a monetary limit 3) insurance levels 4) details of the breach 5) a time limit
- A. 2,4,5
- B. 1,3,4
- C. 1,2,5
- D. 3,4,5
Answer: C
Explanation:
Explanation
Indemnity clauses should contain duties of both parties, a monetary limit and a time limit (1 2 and 5). It should also detail what types of costs are covered. These four points are explained on p.61. An indemnity clause doesn't necessarily signal a breach in contract, and levels of insurance are not relevant here.
NEW QUESTION 44
Maple Tree Limited is a Canadian company who has recently signed a new contract with a supplier who is based in China. Maple Tree Limited will be buying a raw material with a reputation for severe price fluctuations. Which of the following would help mitigate the risk that this poses? Select TWO options
- A. use a forward exchange contract
- B. quote in the supplier's currency
- C. quote in the buyer's currency
- D. fix the exchange rate at the current rate
Answer: A,D
Explanation:
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
NEW QUESTION 45
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. no- this is not the purpose of insurance
- B. no- the insurance would not cover the cost of surgery, only for lost wages if he is unable to work
- C. yes- the insurance will cover all medical expenses as the accident occurred during his working hours
- D. yes- the insurance can be used as the accident occurred on the company's premises
Answer: A
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 46
Which of the following will you put into box 3?
- A. financial
- B. hazard
- C. strategic
(Correct) - D. operational
Answer: C
Explanation:
Explanation
An aging workforce is a strategic risk for the business.
NEW QUESTION 47
Which of the following statements about FIDIC Contracts are true? Select TWO:
- A. Change control is called a 'Compensation Event'
- B. They are used in the construction industry
- C. Early warning notices are given when risks arise
- D. They are more collaborative than NEC contracts
- E. Each party manages their own risks separately
Answer: B,E
Explanation:
Explanation
1 and 3 are correct answers. Options 2,4, and 5 are true for NEC contracts - NEC is more collaborative than FIDIC, early warning notices are given and change controls are called 'Compensation Events'. See p.74 for more information on FIDIC and NEC Contracts. This does come up in the exam
NEW QUESTION 48
Which of the following models would be used to explore internal and external risks to a business?
- A. Porter's 5 Forces
- B. Poisson Distribution
- C. STEEPLE
- D. SWOT
Answer: D
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 49
Controlling a risk through the development of actions that can minimise the impact the organisation will suffer as a result of the risk event is known as what control?
- A. terminate
- B. tolerate
- C. treat
- D. transfer
Answer: C
Explanation:
Explanation
This is the description of treat mentioned on p. 143. The 4 Ts is a popular exam topic
NEW QUESTION 50
A black swan event is what type of occurrence?
- A. an occurrence with a negative outcome
- B. an unusual occurrence
- C. a common occurrence
- D. an occurrence with a good outcome
Answer: B
Explanation:
Explanation
A black swan event is an unusual occurrence - something that is rare. See p.124
NEW QUESTION 51
Rabbit Manufacturing operates several factories which create stuffed animals. As these stuffed animals are mainly bought for children, it is extremely important that the quality of the product is assured, and there are no dangerous or small parts which could become choking hazards. Which of the following are appraisal costs that the company should undertake in order to mitigate the risk of poor quality products entering the market?
- A. introduce a 0 defect approach
- B. staff training to ensure higher quality products are made
- C. using a pro-active quality management system
- D. quality control inspections
Answer: D
Explanation:
Explanation
Of these four answers only one is an appraisal cost and that is answer 1. The other three options are prevention costs. There is a table of appraisal costs and prevention costs on p. 26 Appraisal costs are reactive- they're done after the product is manufactured. Preventative costs are actions taken in quality assurance.
NEW QUESTION 52
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. trade credit
- B. product liability
- C. public liability
- D. professional indemnity
Answer: D
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 53
What is the purpose of a Disaster Recovery Plan?
- A. to get critical systems operational
- B. to return to business as usual
- C. to detect and react to an emergency situation, focusing on people's safety
- D. to increase output to normal levels following a disaster
Answer: A
Explanation:
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 QUESTION 54
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. accepting a kick-back
- B. holiday fraud
- C. counterfeiting
- D. bribery
Answer: D
Explanation:
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
NEW QUESTION 55
What is the purpose of an indemnity clause within a contract?
- A. to ensure both parties are adequately insured if something were to go wrong
- B. to assign risk to each party
- C. to transfer risk from one party to another
- D. to explain what would happen in the case of a force majeure
Answer: C
Explanation:
Explanation
Indemnity clauses transfer risk from one party to another. It is an arrangement whereby one party promises to compensate the other party for a trigger event. An example of an indemnity clause could be a construction firm is building a new bridge and the project is supposed to be completed by 1st June. An indemnity clause may state that should the bridge not be ready by this date, the construction firm will compensate the buyer by X amount. See p.61 for more information on indemnity.
NEW QUESTION 56
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, 3, 2
- D. 1, 2, 3
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 57
When would a company use the Stakeholder Salience Model?
- A. to show stakeholders how the company will mitigate risks
- B. to engage stakeholders in the development of risk assessments
- C. to inform stakeholders of potential risks
- D. as part of a disaster recovery plan
Answer: B
Explanation:
Explanation
This is used to engage stakeholders in the development of risk assessments.
P. 137-138
NEW QUESTION 58
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