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
A buyer negotiates a price escalation clause tied to a published commodity index. This is an example of:
Answer: Risk sharing between buyer and seller
An index-linked escalation clause shares price volatility risk between buyer and seller, with both parties bearing a portion of market movement.
Which metric is MOST useful for measuring the effectiveness of a supplier risk management program over time?
Answer: Reduction in supply disruption incidents and recovery time objectives met
Tracking actual disruptions and whether recovery targets are met directly measures how well risk controls are reducing impact and restoring supply.
Which of the following BEST describes 'regulatory compliance risk' in procurement?
Answer: Risk that purchased goods or supplier practices violate applicable laws or regulations
Regulatory compliance risk includes exposure to fines, import bans, or reputational harm when goods or supplier conduct violate laws such as trade sanctions, labor law, or environmental standards.
A buyer is concerned about losing access to critical proprietary tooling held at a supplier's facility. The BEST contractual protection is to:
Answer: Retain legal title to the tooling in the contract and require it to be marked as buyer property
Retaining title to tooling and requiring it to be labeled as buyer-owned ensures the buyer can reclaim it in the event of supplier insolvency or contract termination.
Early supplier involvement (ESI) in product development helps reduce procurement risk by:
Answer: Identifying supply chain constraints and material risks before design decisions are committed
ESI brings supplier expertise into the design phase so that components are specified with supply availability and risk in mind, reducing downstream sourcing problems.
Which of the following is a key indicator of 'concentration risk' in a supplier portfolio?
Answer: Excessive spend or dependency on a single supplier or small group of suppliers
Concentration risk arises when too much spend, volume, or capability is dependent on one or very few suppliers, creating vulnerability to supply failure.
A procurement professional applies a 'risk-based approach to supplier selection,' which means:
Answer: Weighting evaluation criteria to reflect the risk level and criticality of the procurement
A risk-based approach tailors the rigor and weighting of supplier evaluation criteria to the strategic importance and risk exposure of the specific procurement.