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 approach is MOST effective for managing price volatility risk on commodity purchases?
Answer: Hedging through forward contracts or options
Hedging with forward contracts or options locks in future pricing, protecting the buyer against adverse commodity price movements.
A procurement risk register should be reviewed and updated:
Answer: Periodically and whenever a significant change occurs in the supply environment
Risk registers must be living documents that are refreshed regularly and triggered by events like supplier changes, market shifts, or regulatory updates.
What does a 'risk heat map' visually display in procurement risk management?
Answer: Risks plotted by their likelihood and potential impact
A risk heat map plots each identified risk on a grid of probability versus impact, enabling prioritization of risks requiring immediate attention.
In procurement, reputational risk most commonly arises from:
Answer: Suppliers engaging in unethical labor or environmental practices
If a supplier violates labor laws or environmental standards, the buying organization can suffer serious reputational damage through association.
Which of the following BEST describes a 'dual-source' procurement strategy?
Answer: Awarding business to two suppliers to maintain competition and backup capacity
Dual-sourcing maintains at least two qualified suppliers for a critical item, reducing dependency and providing redundancy if one supplier fails.
A buyer is evaluating a new overseas supplier. Which tool is MOST useful for assessing country-level political and economic risk?
Answer: Country risk ratings from agencies such as Dun & Bradstreet or Coface
Country risk ratings from specialized agencies aggregate political stability, economic conditions, and payment risk data to help buyers assess geographic exposure.
The primary benefit of including an audit rights clause in a supplier contract is to:
Answer: Enable the buyer to verify supplier compliance with contract terms and standards
Audit rights clauses give the buyer legal authority to inspect supplier records, facilities, and processes to confirm adherence to agreed requirements.