l5 m2m3 Questions

CIPS LEVEL 5 – RISK – M2 & M3
(1)__A procurement manager is responsible for a high-risk and medium-value contract for which the procurement
organisation is critically dependent on the supplier. The procurement manager has instructed the supplier to submit a
disaster recovery plan. Is this action appropriate?
Answer: Yes, the plan will show how the supplier will continue to operate and deliver the service in a disaster situation
(2) A supplier's terms and conditions include provision in respect of tsunami, earthquakes and volcanic eruption. This type
of provision is known as....
Answer: exclusion an exclusion clause
(3) Software Development Inc (SDI) develops and markets a range of business applications and products. It has its own
product development resource but also uses external contractors where expertise is not available in house. SDI is just
about to start working with a small organisation called XNX Developers (XNX) on a highly secret new development
currently known as Project Y. SDI and XNX have worked together successfully in the past. Ultimately, when the
development is completed, SDI will pay XNX a one-off fee for exclusive and full ownership of Project Y. XNX is happy with
this arrangement as it needs an injection of funds to support the development of its own product range and bank finance is
not available. SDI and XNX have also reached agreement on XNX’s acceptance to compensate SDI for potential future
liability on Project Y in respect of the development work it has undertaken. Based on the information provided, which of
the following clauses will be a priority for SDI to include in the contract to address its specific needs? Select TWO that
apply.
Answer: Intellectual property rights and Indemnity
(4) Which of the following are potential risks that are directly associated with a company's brand? Select TWO that apply.
Answer: Positioning and Reputation
(5) Product Manufacturing Group (PMG) is UK based and has just started sourcing materials from Europe and has to pay its
supplier in Euros. This is PMG's first exposure to Euro denominated payments. It does however sell its products into
European markets and has Euro receivables. Which of the following will be the most appropriate for PMG to manage its
Euro currency risk exposure?
Answer: Currency Account
(6) Recognised risk management strategies to mitigate risks include which of the following? Select TWO that apply.
Answer: Transfer and Treat
(7) The Sarbanes-Oxley regulations are mostly focused on? Select TWO that apply.
Answer: Corporate financial disclosure and Investors protection
(8) Is it usual to encourage whistle-blowing amongst employees working in the supply chain if they suspect unethical
behaviour in the supply chain?
Answer: Yes, because these staff are more likely to be aware of such malpractices
(9) ManCo Inc is a global manufacturing organisation. It has a highly integrated supply chain. All parties are interconnected
with the result that data availability and transparency are high. Its CPO however is concerned about technological risk.
Which of the following is such a risk for ManCo?
Answer: Cyber Crime
(10) The general principle relating to penalty clauses is that they must be which of the following to be legally enforceable
by the courts? Select TWO that apply.
Answer: Sufficient compensation relative to the damages
(11) A buyer is seeking to include a clear regime within the contract to act as a lever to encourage the supplier to focus on
achieving the stated performance measures. Should they consider using service credits?
Answer: Yes, these encourage suppliers to achieve stated measures
(12) Which of the following are recognised conflict resolution approaches? Select THREE that apply.
Answer: Litigation, Negotiation and Arbitration
(13) Regional Social Housing (RSH) is a public body which operates within a strictly regulated environment. It is under close
public scrutiny in terms of how it manages its finances. It has a contract in place with a facilities management provider
(FM). It is a five year contract and year two has just commenced. Within its regulations RSH is allowed to make some
changes to contracts once awarded. There has been a recent change in safeguarding legislation which has necessitated a
change in the contract. An initial meeting has taken place between RSH and the supplier. Which of the following are
required to enable the change to go ahead (assume RSH can make this change within the procurement regulations)? Select
TWO that apply.
Answer: Contract variation clause AND Agreement of all parties
(14) Which of the following will terminate an offer? Select TWO that apply.
Answer: Revocation AND Acceptance
(15) Where a subsidiary company is bidding for a contract but it has a poor credit rating, the procurement organisation
could obtain which of the following from the parent company to reduce the risk?
Answer: Guarantee
(16) A buyer has not been managing contract delivery since the agreement was created a year ago. The supplier has not
been delivering what was required, although the procurement organisation has been paying its monthly invoices for the
last year. In all likelihood the courts would regard this situation as:
Answer: Acceptance by Performance.
(17) Specific performance is always a legal right for the buyer in the event of a supplier breach of contract. Is this correct?
Answer: No, it is only available when there is no other remedy
(18) A large manufacturing company has begun a project to increase the size of their premises. The procurement team has
estimated that if the main supplier fails to complete the project on schedule it will incur costs and losses of $20,000 per
day for every day there is a delay. It should use which of the following clause in the contract with the supplier?
Answers: Liquidated damages.

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CIPS LEVEL 5 – RISK – M2 & M3

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