Risk Management in Procurement Flashcards
7 cards from real CPP practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Risk Management in Procurement flashcards as text
Which risk mitigation strategy involves transferring procurement risk to a third party through insurance or contractual clauses?
Answer: Risk transfer
Risk transfer shifts the financial burden of a risk to another party, commonly through insurance policies or hold-harmless contract clauses.
A buyer discovers that a critical sole-source supplier is experiencing severe financial difficulties. The BEST immediate action is to:
Answer: Conduct a financial health assessment and develop a contingency sourcing plan
Assessing the supplier's financial status and preparing alternative sourcing options is the proactive step that protects supply continuity.
What is the primary purpose of a supplier scorecard in risk management?
Answer: To document and monitor supplier performance against agreed metrics
Supplier scorecards provide ongoing visibility into performance trends, enabling early detection of risk indicators before they become critical issues.
In procurement risk management, 'inherent risk' refers to:
Answer: Risk that exists before any mitigating controls are in place
Inherent risk is the raw, uncontrolled level of risk present in a procurement activity before any mitigation measures are implemented.
Which contract clause directly protects the buyer from supplier insolvency by ensuring access to work-in-progress and tooling?
Answer: Step-in rights clause
Step-in rights allow the buyer to take over supplier operations or assets if the supplier fails, protecting supply continuity during insolvency.
When assessing supply chain risk, which factor is MOST associated with geographic concentration risk?
Answer: Relying on suppliers clustered in a single region prone to natural disasters
Geographic concentration means a disruption like an earthquake or flood in one region can simultaneously affect all suppliers, amplifying risk.
A force majeure clause in a procurement contract is intended to:
Answer: Excuse parties from performance obligations due to unforeseeable extraordinary events
Force majeure clauses relieve both parties of liability when performance is prevented by events outside their control, such as natural disasters or wars.