CPM Risk Management and Mitigation Flashcards
6 cards from real CPM practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 CPM Risk Management and Mitigation flashcards as text
What is the purpose of a supplier audit in risk management?
Answer: To verify that a supplier meets required quality, compliance, and operational standards
Supplier audits assess whether vendors comply with contractual, quality, regulatory, and ethical requirements, identifying risks before they cause disruption.
What is 'geopolitical risk' in global sourcing?
Answer: The risk that political actions, conflicts, or policy changes in a region could disrupt supply chains
Geopolitical risk arises when government actions, conflicts, trade disputes, or sanctions in a supplier's region threaten the continuity of supply.
What does 'total cost of risk' consider beyond just the probability of a risk event?
Answer: The full financial impact including mitigation costs, insurance, loss frequency, and loss severity
Total cost of risk is a comprehensive view encompassing all costs related to a risk, including prevention measures, insurance, and the direct and indirect losses if a risk materializes.
Which approach to risk management involves regularly reviewing and updating the organization's risk register?
Answer: Continuous risk monitoring
Continuous risk monitoring ensures the risk register stays current as supplier relationships, market conditions, and internal factors evolve.
What is 'reputational risk' in the context of supplier selection?
Answer: The risk that association with a supplier's unethical or illegal practices will damage the buying organization's public image
Reputational risk arises when a supplier's misconduct — such as labor violations or environmental damage — becomes linked to the buying organization, harming its brand.
What is the role of insurance in procurement risk management?
Answer: It transfers the financial consequences of certain risks to an insurer, reducing the buyer's direct loss exposure
Insurance is a risk transfer tool that shifts the financial burden of specific losses (e.g., cargo damage, product liability) to an insurer, limiting the buyer's out-of-pocket exposure.