CPL CPL Risk Management & Business Continuity 1 — Questions and Answers
Question 1: Which risk management strategy involves shifting potential losses to a third party, such as an insurance provider or contract carrier?
- Risk avoidance
- Risk acceptance
- Risk transfer (Correct answer)
- Risk mitigation
Correct answer: Risk transfer
Risk transfer moves the financial burden of a potential loss to another party, commonly through insurance or contractual clauses.
Question 2: A supply chain disruption that originates from a single supplier failure and cascades through multiple tiers is best described as which type of risk?
- Demand-side risk
- Supply-side risk (Correct answer)
- Geopolitical risk
- Operational risk
Correct answer: Supply-side risk
Supply-side risk refers to disruptions originating from suppliers or upstream partners that affect the flow of goods or materials.
Question 3: The primary purpose of a Business Continuity Plan (BCP) in logistics is to:
- Maximize profit during normal operations
- Ensure critical supply chain functions can continue during a disruption (Correct answer)
- Eliminate all identified supply chain risks
- Reduce the number of logistics partners
Correct answer: Ensure critical supply chain functions can continue during a disruption
A BCP defines procedures and resources needed to sustain critical logistics functions when normal operations are interrupted.
Question 4: Which metric is used to measure how long an organization can tolerate a disruption before critical operations are irreparably affected?
- Recovery Time Objective (RTO)
- Recovery Point Objective (RPO)
- Maximum Tolerable Downtime (MTD) (Correct answer)
- Mean Time Between Failures (MTBF)
Correct answer: Maximum Tolerable Downtime (MTD)
Maximum Tolerable Downtime (MTD) defines the longest period a business process can be disrupted before causing unacceptable consequences.
Question 5: Dual sourcing in supply chain risk management primarily helps to:
- Reduce procurement costs through volume discounts
- Eliminate the risk of quality defects
- Decrease dependence on a single supplier and reduce supply disruption risk (Correct answer)
- Simplify supplier relationship management
Correct answer: Decrease dependence on a single supplier and reduce supply disruption risk
Dual sourcing spreads supply risk by maintaining relationships with at least two suppliers for critical materials or components.
Question 6: A logistics risk assessment matrix typically plots risks based on which two dimensions?
- Cost and lead time
- Probability and impact (Correct answer)
- Supplier location and volume
- Frequency and speed
Correct answer: Probability and impact
A risk matrix evaluates each identified risk by its likelihood of occurrence (probability) and the severity of its consequences (impact).
CPL CPL Risk Management & Business Continuity 1
Which risk management strategy involves shifting potential losses to a third party, such as an insurance provider or contract carrier?