Managing Supply Chain Risk (L5M2) Free Practice Test

Question 1

Leo LLP is a company which sources materials internationally, and then sells these on nationally at a small margin. Leo LLP has noted that there is a risk of exchange rate fluctuations making their purchases unviable.
The CFO has declared that the only way to mitigate this risk is via hedging and that they should look at price fixing. is this correct?

A. no- Leo LLP can take out insurance to mitigate this risk

B. no- Leo LLP could do nothing and increase its prices instead

C. yes- hedging is the only solution to mitigate the risk of adverse price movements

D. yes- this reduces the risk to 0

Correct Answer: B

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Question 2

The triple bottom line is a way to refer to sustainability practices. Which of the following is included within the Triple Bottom Line? 1. People, 2. Profit, 3. Price, 4. Planet 5. Power.

A. 1,3 and 5

B. 1,2 and 3

C. 2, 4 and 5

D. 1,2 and 4

Correct Answer: D

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Question 3

In probability theory, the chances of a coin landing on heads would be expressed in what way?

A. one half

B. 50%

C. 50-50

D. 0.5

Correct Answer: D

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Question 4

Which of the following will you put into box 3?

A. transfer

B. terminate

C. tolerate

D. treat

Correct Answer: B

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Question 5

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. quote in the buyer's currency

B. quote in the supplier's currency

C. fix the exchange rate at the current rate

D. use a forward exchange contract

Correct Answer: C,D

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Question 6

Which of the following will you put into box 2?

A. operational

B. strategic

C. hazard
(Correct)

D. financial

Correct Answer: C

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CIPS Managing Supply Chain Risk (L5M2) Free Practice Test