CPS Risk & Performance 2 — Questions and Answers
Question 1: A process owner notices that cycle time variability has increased over the past quarter despite no change in inputs. Which risk response strategy best addresses this situation?
- Accept the risk and document it
- Transfer the risk to a supplier
- Investigate root causes and implement controls to reduce variability (Correct answer)
- Avoid the process entirely
Correct answer: Investigate root causes and implement controls to reduce variability
Increased variability with stable inputs signals an emerging process risk that requires root cause analysis and corrective controls.
Question 2: Which KPI most directly measures the effectiveness of a risk mitigation plan implemented in a business process?
- Employee satisfaction score
- Reduction in the frequency and severity of identified risk events (Correct answer)
- Total number of process steps
- Revenue per employee
Correct answer: Reduction in the frequency and severity of identified risk events
An effective mitigation plan should reduce both how often and how severely risk events occur, making that the primary effectiveness measure.
Question 3: In a risk heat map, a risk plotted in the upper-right quadrant requires which treatment priority?
- Low priority — monitor only
- Medium priority — schedule for future review
- High priority — immediate mitigation action required (Correct answer)
- No action — inherent risks are acceptable
Correct answer: High priority — immediate mitigation action required
The upper-right quadrant of a heat map represents high likelihood and high impact, demanding immediate and active mitigation.
Question 4: A CPS practitioner is asked to select a leading indicator for process performance. Which of the following qualifies as a leading indicator?
- Number of defects found last month
- On-time delivery rate for the previous quarter
- Supplier quality audit score obtained before production begins (Correct answer)
- Customer complaint volume year-to-date
Correct answer: Supplier quality audit score obtained before production begins
A leading indicator predicts future performance; a pre-production supplier audit score signals quality risk before defects occur.
Question 5: When conducting a Failure Mode and Effects Analysis (FMEA), the Risk Priority Number (RPN) is calculated as:
- Severity × Occurrence
- Occurrence ÷ Detection
- Severity × Occurrence × Detection (Correct answer)
- Severity + Occurrence + Detection
Correct answer: Severity × Occurrence × Detection
RPN = Severity × Occurrence × Detection, giving a composite score to prioritize which failure modes need corrective action first.
Question 6: A process team identifies a risk with a 5% probability of occurrence and an impact of $200,000. What is the Expected Monetary Value (EMV) of this risk?
- $10,000 (Correct answer)
- $200,000
- $40,000
- $1,000
Correct answer: $10,000
EMV = Probability × Impact = 0.05 × $200,000 = $10,000.
Question 7: Which balanced scorecard perspective directly encompasses process risk management activities?
- Financial perspective
- Customer perspective
- Internal business process perspective (Correct answer)
- Learning and growth perspective
Correct answer: Internal business process perspective
Risk controls and process improvement activities reside within the internal business process perspective of the balanced scorecard.
CPS Risk & Performance 2
A process owner notices that cycle time variability has increased over the past quarter despite no change in inputs.
Which risk response strategy best addresses this situation?