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Risk Assessment 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 Assessment flashcards as text

  1. A supplier risk has a 20% probability of occurring and would cost $150,000 if it occurs. What is its expected monetary value (EMV)?

    Answer: $30,000

    EMV equals probability multiplied by impact, so 0.20 × $150,000 = $30,000.

  2. In Failure Mode and Effects Analysis (FMEA), how is the Risk Priority Number (RPN) calculated?

    Answer: Severity × Occurrence × Detection

    FMEA multiplies severity, occurrence, and detection ratings to produce the RPN used to rank failure modes.

  3. Which term describes the level of risk remaining after mitigation actions have been implemented?

    Answer: Residual risk

    Residual risk is the exposure that remains after controls and responses are applied.

  4. A buyer purchases cargo insurance to protect against loss during ocean transit. Which risk response strategy is this?

    Answer: Transfer

    Insurance shifts the financial consequence of a risk to a third party, which is risk transfer.

  5. Which contract type places the greatest cost risk on the seller?

    Answer: Firm-fixed-price

    Under a firm-fixed-price contract, the seller absorbs any cost overruns.

  6. An Altman Z-score is primarily used in supplier risk assessment to evaluate what?

    Answer: Likelihood of supplier bankruptcy

    The Altman Z-score combines financial ratios to predict the probability of corporate bankruptcy.

  7. Which procurement situation typically carries the highest supply continuity risk?

    Answer: Sole source for a critical component

    A sole source for a critical item means no alternative supplier exists if disruption occurs.