[Q29-Q47] Full L5M2 Practice Test and 117 Unique Questions, Get it Now!

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Full L5M2 Practice Test and 117 Unique Questions, Get it Now!

The Best L5M2 Exam Study Material Premium Files and Preparation Tool

The CIPS L5M2 Exam, also known as Managing Supply Chain Risk, is designed for procurement and supply chain professionals who are responsible for identifying, assessing, and managing risks in their organization’s supply chain. This exam is part of the Chartered Institute of Procurement and Supply (CIPS) Level 5 Advanced Diploma in Procurement and Supply, which is a globally recognized qualification for procurement and supply chain professionals. The CIPS L5M2 Exam covers a wide range of topics related to supply chain risk management, including risk identification, risk assessment, risk mitigation strategies, and supply chain resilience.

The CIPS L5M2 (Managing Supply Chain Risk) Certification Exam is a professional certification exam offered by the Chartered Institute of Procurement and Supply (CIPS). This exam is designed to test the knowledge and skills of procurement and supply chain professionals in managing supply chain risks. The exam is open to individuals who have completed the CIPS Level 5 Advanced Diploma in Procurement and Supply.

Q29. Which of the following will you put into box 6?

service credits

NDA

Conformance Specification

Force Majeure

Explanation
The correct answers are as follows:
Table Description automatically generated

Q30. There are three main areas where third party suppliers are used in risk management. What are they?

contract negotiations

supply chain management

credit ratings

risk auditing

disaster recovery

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.

Q31. Which of the following stages would come first within a risk assessment?

evaluate risk

treat risk

monitor risk

analyse risk

Explanation
analyse is the correct answer. The full process is: establish context- identify- analyse – evaluate – treat – monitor and review. This is from p.122

Q32. 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

quote in the supplier’s currency

quote in the buyer’s currency

use a forward exchange contract

fix the exchange rate at the current rate

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

Q33. Which of the following will you put into box 2?

transfer

treat

tolerate

terminate

Explanation
The correct answers are as follows:
Table Description automatically generated

Cashflow issues can lead to serious financial problems and the company going bust. Therefore this risk must be treated.

Q34. An interconnected supply chain would have what affect on the creation of a risk register?

risks will be larger

risks will sit with the procurement team

actions to mitigate one risk, may create a new risk

actions to mitigate risks will require a cross-functional team

Explanation
Actions to mitigate one risk, may create another risk. This is a direct quote from p. 132

Q35. What is the final stage of Deming’s Plan – Do – Check cycle which is encouraged by ISO9001?

Improve

Review

Act

Assess

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

Q36. 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?

yes- hedging is the only solution to mitigate the risk of adverse price movements

yes- this reduces the risk to 0

no- Leo LLP could do nothing and increase its prices instead

no- Leo LLP can take out insurance to mitigate this risk

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

Q37. Which of the following will you put into box 2?

hazard
(Correct)

financial

strategic

operational

Explanation
Table Description automatically generated

Q38. The triple bottom line is a way to refer to sustainability practices. Which of the following is included within the Triple Bottom Line? 1. People, 2. Profit, 3. Price, 4. Planet 5. Power.

1,2 and 3

1,3 and 5

2, 4 and 5

1,2 and 4

Explanation
Triple Bottom Line – people, profit and planet – options 1, 2 and 4. See p.45 for more details on sustainability

Q39. Which of the following is not a benefit of having a contingency plan?

competitive advantage

increased staff morale

greater resilience to force majeure events

increased profits

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

Q40. Jan is a chef who has created a new type of curry. She is worried that another chef may steal her curry recipe so is wanting to protect this. Which type of IP protection should Jan take out?

copywrite

patent

trademark

trade secret

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

Q41. Risk should be a ‘golden thread’ that links all of the organisation’s strategies, communications, policies and training. The LILAC model describes how a risk-aware culture can be created. Which of the following form part of the LILAC model?

Leadership and Learning

Investment and Accountability

Appraisal and Communication

Learning and Information

Explanation
The LILAC Model is; Leadership, Involvement, Learning, Accountability and Communication.
P. 149

Q42. 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

1, 2, 3

1, 3, 2

2, 1, 3

3, 1, 2

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’.

Q43. Which of the following will you put into box 4?

hazard

financial

strategic
(Correct)

operational

Explanation

Anything to do with currency is a financial risk.

Q44. Chloe is a procurement manager at Ruby Company. She has been asked to join a cross-functional team to review the company’s risk appetite, potential risks within the supply chain and brainstorm mitigating actions.
Chloe has suggested that the cross-functional team should first draw up a list of potential supply chain risks and potential strategies to overcome the risks. Is Chloe correct?

yes- the first thing the team should look at are the risks and categorise these by topic

yes- the team should focus on creating a risk register and strategies for mitigating risks as quickly as possible

no- the team should review the company’s risk appetite before creating a risk register

no- Chloe should first speak with suppliers before drawing up the list of potential supply chain risks

Explanation
The correct answer is 3 ‘no- the team should review the company’s risk appetite before creating a risk register’.
This questions tests to see if you understand what risk appetite is and when this should be reviewed. Risk appetite is the first stage in developing any plan as it will influence the next stages. For example if the company has a large risk appetite, this would affect how they would classify risks and what mitigating actions they would take. Risk appetite is explained in chapter 1.1 (p.4) but it also comes up in Learning Outcome 3

Q45. Which of the following risks would likely be tolerated by a company?

no risks should be tolerated

opportunities which are low risk and low impact

opportunities which are low risk and high impact

opportunities which are high risk and low impact

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.

Q46. 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

organised well in advance to allow the factory managers to prepare for the audit

conduct on the spot visits with no warning

conduct group interviews with workers to ensure that all voices are heard

conduct private meetings with a selection of workers

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

Q47. Which of the following is an internal risk for a company?

supplier’s factory burns down

exchange rate fluctuations

government policy changes

lack of available personnel

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

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The CIPS L5M2 certification exam is an essential tool for procurement and supply chain professionals seeking to enhance their knowledge and skills in managing supply chain risks. The exam covers a broad range of topics, including risk identification, analysis, and mitigation, as well as business continuity planning and risk assessment methodologies. Successfully passing the exam can open up new career opportunities and enhance professional credibility in the procurement and supply chain industry.

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[Q29-Q47] Full L5M2 Practice Test and 117 Unique Questions, Get it Now!

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