[Jun 23, 2023] L5M2 Exam Dumps, L5M2 Practice Test Questions
Free L5M2 Study Guides Exam Questions and Answer
To prepare for the CIPS L5M2 exam, candidates should have a solid understanding of procurement and supply chain management principles. They should also be familiar with the concepts and best practices related to risk management. Candidates can prepare for the exam by studying the CIPS Level 5 Advanced Diploma in Procurement and Supply course materials, attending training sessions, and practicing with past exam papers. With the right preparation and a thorough understanding of the exam topics, candidates can successfully pass the CIPS L5M2 exam and advance their careers in procurement and supply chain management.
NEW QUESTION # 45
Standard Deviation is the measure of the variation between the values in a range of data. From which of the following could you calculate Standard Deviation?
- A. normal distribution
- B. poisson distribution
- C. binomial distribution
- D. value at risk
Answer: A
Explanation:
Explanation
This is calculated from normal distribution. In normal distribution most of the values are concentrated around the middle of the data set- standard deviation identifies how far a data point is from this average. See p.128 for more information
NEW QUESTION # 46
Which of the following is a method for approaching risks?
- A. translate
- B. transport
- C. tolerate
- D. take out
Answer: C
Explanation:
Explanation
Tolerate is one of the 4 Ts. This is a popular exam question so do learn the 4 Ts: Tolerate, Treat, Transfer and Terminate. See p.32.
NEW QUESTION # 47
Zara is a procurement manager who is thinking about working with a new supplier to source buttons for her clothes manufacturing business. Her manager has asked her to do some due diligence on the supplier's financial stability. What should she do?
- A. use an outsourced third-party credit rating agency
- B. conduct a credit check on the supplier based on the information provided by them in the tender
- C. conduct a risk assessment based on the information provided by the supplier in the tender
- D. use an outsources third-party risk management consultant
Answer: A
Explanation:
Explanation
She should use a credit rating agency for this. She should not do this herself as she won't have access to accurate information like an agency will. The supplier may not have been truthful in their tender. For information on Credit Rating Agencies see p.79
NEW QUESTION # 48
Which of the following will you put into box 6?
- A. dual sourcing
- B. monitor
- C. insurance
- D. audit
Answer: A
Explanation:
Explanation
The correct answers are as follows:
Table Description automatically generated with low confidence
NEW QUESTION # 49
Which of the following are key areas of ISO 26000 Social Responsibility? Select THREE.
- A. human rights
- B. efficient systems
- C. consumer issues
- D. quality management
- E. organisational governance
Answer: A,C,E
Explanation:
Explanation
1 3 and 4 are the correct answers. There are 7 key areas that ISO 26000 focuses on. As well as these three, there is also labour practices, the environment, fair operating practices and community involvement. See p. 51 of the study guide. ISOs are a popular exam topic so do revise these before the exam.
NEW QUESTION # 50
Which of the following is an example of hedging?
- A. audits
- B. dual-sourcing
- C. insurance
- D. risk assessments
Answer: C
Explanation:
Explanation
Insurance is a form of hedging. Hedging is using a financial instrument to offset the potential risk of an adverse loss (p.93) none of the other options mentioned are financial instruments.
NEW QUESTION # 51
A company with a large risk appetite would do which of the following?
- A. take few, well calculated risks
- B. take risks where it feels it will win more than it loses
- C. take all risks
- D. avoid taking risks
Answer: B
Explanation:
Explanation
2 is the correct answer. Risk appetite is the level of risk that an individual or organisation is comfortable taking (p.4). Having a large risk appetite does not mean that you want to take every risk (as that would be irresponsible), rather, a large risk appetite means you're more likely to gamble and take calculated risks, even though they might not pay off. A small risk appetite would describe options 3 and 4 - taking few risks, or none at all.
NEW QUESTION # 52
Which of the following will you put into box 5?
- A. CSR Policy
- B. Standardise Payment Terms
- C. Quote in Buyer's Currency
- D. Force Majeure
Answer: A
Explanation:
Explanation
The correct answers are as follows:
Table Description automatically generated
CSR= Corporate Social Responsibility
NEW QUESTION # 53
Neruda Incorporated is evaluating potential suppliers' financial standings as part of a tender. Which of the following companies is the most financially stable?
- A. Company B has low liquidity, a high gearing ratio and increasing sales trends
- B. Company D has high liquidity, low gearing and lots of fixed assets
- C. Company C has low liquidity, low gearing and increasing sales trend
- D. Company A has a high gearing ratio, high liquidity and few fixed assets
Answer: B
Explanation:
Explanation
Company D is the strongest. You want a company with high liquidity (this means they can easily pay any debts) and low gearing (meaning that their company isn't financed by debt). This question comes from p.24 of the CIPS study guide. It doesn't go into a lot of detail on financial ratios and gearing, as this was covered in Level 4. If you're rusty on financial ratios and gearing I recommend revising these before the exam.
NEW QUESTION # 54
Maple Tree Limited is a Canadian company who has recently signed a new contract with a supplier who is based in China. Maple Tree Limited will be buying a raw material with a reputation for severe price fluctuations. Which of the following would help mitigate the risk that this poses? Select TWO options
- A. fix the exchange rate at the current rate
- B. quote in the supplier's currency
- C. quote in the buyer's currency
- D. use a forward exchange contract
Answer: A,D
Explanation:
Explanation
The correct answers are 3 + 4. To mitigate the risk, you want to ensure price stability for the duration of the contract- you don't want the prices to keep going up and down. Therefore options 1 and 2 wouldn't help- the prices would still go up and down regardless of which currency was used for quotes. Using a forward contract, or fixing the exchange rate, however, would give price certainty, and therefore mitigate the risk. See p.23 for more information on currency risks and how to overcome these
NEW QUESTION # 55
A supplier of non-critical items has a low credit score, Which of the following actions should be taken? Select TWO options.
- A. inform the CEO of the company
- B. conduct a benchmarking exercise
- C. create a risk assessment and mitigation plan
- D. replace the supplier as quickly as possible with a more financially stable supplier
Answer: B,C
Explanation:
Explanation
The correct answers are conduct benchmarking and create a risk assessment. This supplier provides low value and low risk products - therefore the fact they have a bad credit rating isn't too much of a risk to your company. It's worth doing a benchmarking exercise to compare their position to others in the market to see if there are any industry-wide trends, and to create a risk assessment and mitigation plan. This could involve working with the supplier to help them improve their credit score, for example by using more favourable payment terms so they have a better cash flow. There's no need to replace them immediately, and there's no need to tell the CEO- they probably have more important things to think about than a singular supplier of non-critical items See p.81
NEW QUESTION # 56
Company X is a large company which is traded on the UK stock exchange. According to the Companies (Miscellaneous Reporting) Regulations 2018- is it obligatory for Company X to follow a Corporate Governance Code?
- A. no- but if it doesn't follow a Corporate Governance Code it must explain the reasons why not
- B. yes- all companies trading on the stock exchange must do this
- C. yes- all companies in the UK must follow this
- D. no- corporate governance codes are not mandatory
Answer: A
Explanation:
Explanation
The correct answer is 4 - the policy is 'comply or explain' - basically say which code you follow, or explain (publicly) why you're not following one. See p. 145 for more information on this
NEW QUESTION # 57
Which of the following will you put into box 2?
- A. environment
- B. operational
- C. intellectual property
(Correct) - D. strategic
Answer: C
Explanation:
Explanation
The correct answers are as follows:
Table Description automatically generated
NEW QUESTION # 58
In probability theory, the chances of a coin landing on heads would be expressed in what way?
- A. one half
- B. 0.5
- C. 50-50
- D. 50%
Answer: B
Explanation:
Explanation
0.5 - in probability theory, the likelihood of an event is represented as a number between 0 and 1. Therefore this would be written as 0.5. See p. 125
NEW QUESTION # 59
Jan is a chef who has created a new type of curry. She is worried that another chef may steal her curry recipe so is wanting to protect this. Which type of IP protection should Jan take out?
- A. copywrite
- B. trade secret
- C. trademark
- D. patent
Answer: B
Explanation:
Explanation
Trade secrets are used for recipes- they're suitable for confidential information that gives an organisation a competitive edge. For a detailed explanation of the four types of IP cover see p. 64 of the study guide
NEW QUESTION # 60
ISO 20400 represents what area of business?
- A. Supply Chain Security
- B. Sustainable Procurement
- C. Quality Management
- D. Risk Management
Answer: B
Explanation:
Explanation
ISO 20400 is Sustainable Procurement. This is from p. 51 of the study guide- as well as learning what the ISO numbers are, do also learn the key areas of each ISO as these come up in the exam.
NEW QUESTION # 61
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