CPP Risk Management in Procurement 3

Question 1

Which approach is MOST effective for managing price volatility risk on commodity purchases?

Accepted Answer

Hedging through forward contracts or options

Answer

Hedging with forward contracts or options locks in future pricing, protecting the buyer against adverse commodity price movements.

Question 2

A procurement risk register should be reviewed and updated:

Accepted Answer

Periodically and whenever a significant change occurs in the supply environment

Answer

Risk registers must be living documents that are refreshed regularly and triggered by events like supplier changes, market shifts, or regulatory updates.

Question 3

What does a 'risk heat map' visually display in procurement risk management?

Accepted Answer

Risks plotted by their likelihood and potential impact

Answer

A risk heat map plots each identified risk on a grid of probability versus impact, enabling prioritization of risks requiring immediate attention.

Question 4

In procurement, reputational risk most commonly arises from:

Accepted Answer

Suppliers engaging in unethical labor or environmental practices

Answer

If a supplier violates labor laws or environmental standards, the buying organization can suffer serious reputational damage through association.

Question 5

Which of the following BEST describes a 'dual-source' procurement strategy?

Accepted Answer

Awarding business to two suppliers to maintain competition and backup capacity

Answer

Dual-sourcing maintains at least two qualified suppliers for a critical item, reducing dependency and providing redundancy if one supplier fails.

(CPP) Certified Purchasing Professional Practice Test

(CPP) Certified Purchasing Professional Practice Test

CPP Risk Management in Procurement 3