CPP Risk Management in Procurement 2

Question 1

Which risk mitigation strategy involves transferring procurement risk to a third party through insurance or contractual clauses?

Accepted Answer

Risk transfer

Answer

Risk transfer shifts the financial burden of a risk to another party, commonly through insurance policies or hold-harmless contract clauses.

Question 2

A buyer discovers that a critical sole-source supplier is experiencing severe financial difficulties. The BEST immediate action is to:

Accepted Answer

Conduct a financial health assessment and develop a contingency sourcing plan

Answer

Assessing the supplier's financial status and preparing alternative sourcing options is the proactive step that protects supply continuity.

Question 3

What is the primary purpose of a supplier scorecard in risk management?

Accepted Answer

To document and monitor supplier performance against agreed metrics

Answer

Supplier scorecards provide ongoing visibility into performance trends, enabling early detection of risk indicators before they become critical issues.

Question 4

In procurement risk management, 'inherent risk' refers to:

Accepted Answer

Risk that exists before any mitigating controls are in place

Answer

Inherent risk is the raw, uncontrolled level of risk present in a procurement activity before any mitigation measures are implemented.

Question 5

Which contract clause directly protects the buyer from supplier insolvency by ensuring access to work-in-progress and tooling?

Accepted Answer

Step-in rights clause

Answer

Step-in rights allow the buyer to take over supplier operations or assets if the supplier fails, protecting supply continuity during insolvency.

(CPP) Certified Purchasing Professional Practice Test

(CPP) Certified Purchasing Professional Practice Test

CPP Risk Management in Procurement 2