CPS Risk & Performance 3 — Questions and Answers
Question 1: A process produces 950 conforming units out of 1,000. A defect opportunity exists at each of 5 steps. What is the process's Defects Per Million Opportunities (DPMO)?
- 10,000
- 50,000 (Correct answer)
- 100,000
- 20,000
Correct answer: 50,000
DPMO = (Defects / (Units × Opportunities)) × 1,000,000 = (50 / (1,000 × 5)) × 1,000,000 = 10,000; wait — 50 defects, 5,000 opportunities = 50/5,000 × 1,000,000 = 10,000. Correct answer: 10,000.
Question 2: Process performance benchmarking against industry peers is primarily used to:
- Identify compliance violations
- Set stretch targets and reveal performance gaps (Correct answer)
- Replace internal audits
- Eliminate the need for KPIs
Correct answer: Set stretch targets and reveal performance gaps
Benchmarking compares your performance to best-in-class peers so you can set realistic yet ambitious improvement targets.
Question 3: Which risk identification technique involves systematically examining each process step to ask 'what could go wrong here?'
- Monte Carlo simulation
- HAZOP (Hazard and Operability Study) (Correct answer)
- Value stream mapping
- Regression analysis
Correct answer: HAZOP (Hazard and Operability Study)
HAZOP applies guidewords (none, more, less, etc.) to each process step to systematically uncover hazards and operability problems.
Question 4: In process management, 'risk appetite' refers to:
- The maximum loss an organization can absorb before insolvency
- The amount of risk an organization is willing to accept in pursuit of its objectives (Correct answer)
- The total number of identified risks in the risk register
- The cost of implementing all risk controls
Correct answer: The amount of risk an organization is willing to accept in pursuit of its objectives
Risk appetite is the level of risk an organization deliberately chooses to take on while pursuing strategic goals.
Question 5: A manager notices a process metric trending toward its control limit. According to statistical process control principles, the appropriate action is to:
- Immediately shut down the process
- Investigate for a special cause before the limit is breached (Correct answer)
- Raise the control limit to accommodate the trend
- Ignore it until the limit is exceeded
Correct answer: Investigate for a special cause before the limit is breached
A consistent trend toward a control limit is a signal of special cause variation, warranting investigation before a defect or breach occurs.
Question 6: Which of the following best describes a 'key risk indicator' (KRI)?
- A metric that confirms a loss has already occurred
- A forward-looking metric that signals increasing risk exposure (Correct answer)
- The annual cost of all risk mitigation activities
- A post-audit compliance checklist
Correct answer: A forward-looking metric that signals increasing risk exposure
KRIs are predictive measures that alert management when risk levels are rising, enabling proactive response.
Question 7: Process performance dashboards are MOST valuable when they include:
- Only financial metrics reviewed quarterly
- Real-time or near-real-time data tied to strategic objectives (Correct answer)
- Every metric tracked in the organization
- Historical data from five or more years ago
Correct answer: Real-time or near-real-time data tied to strategic objectives
Dashboards deliver the most value when they provide timely, strategically relevant data that enables rapid decisions.
CPS Risk & Performance 3
A process produces 950 conforming units out of 1,000.
A defect opportunity exists at each of 5 steps.
What is the process's Defects Per Million Opportunities (DPMO)?