L5M2 Managing Supply Chain Risk Questions and Answers

Explanation

This is a 'swap' and is explained on p.94. This is a type of 'hedging' but there is no such thing as 'a hedge'. For a more in-depth look at Swaps see: https://www.mercatusenergy.com/blog/bid/77634/an-introduction-to-airline-fuel-hedging-strategies-swaps

Explanation

The correct answers are as follows:

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The consequences of this risk are huge, therefore the risk should be terminated. This means the cause of the risk is taken away (i.e. the animal testing).

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The correct answers are as follows:

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The correct answers are as follows:

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Explanation

2 is the correct answer. Risk appetite is the level of risk that an individual or organisation is comfortable taking (p.4). Having a large risk appetite does not mean that you want to take every risk (as that would be irresponsible), rather, a large risk appetite means you're more likely to gamble and take calculated risks, even though they might not pay off. A small risk appetite would describe options 3 and 4 - taking few risks, or none at all.

Explanation

This is the Yellow Book. This is briefly mentioned on p.74 and can often be missed by students. There is a question in the exam about which type of FIDIC contract can be used for construction projects and this is NOT explained in the study guide - so here is a link to FIDIC so you can revise this before the exam: https://fidic.org/sites/default/files/FIDIC_Suite_of_Contracts_0.pdf

Explanation

this is an example of force majeure. Force majeure is a popular exam topic and comes up in chapter 2.1 p. 66. A force majeure is when an event, such as a storm, happens which affects the delivery of the contract, but over which neither party has any control.

ExplanationThe correct answers are as follows:

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Explanation

The correct answers are reputational risks and geopolitical risks. This is according to p. 77 of the study guide. Although I personally feel this is a bit presumptive, painting all 'low-cost' countries with the same brush (are all 'low-cost countries' politically unstable and allow dodgy things that will affect your reputation?, this is what the textbook says ...

Explanation

The correct answer is 'no-this is not the purpose of insurance'. The question asks if Professional Indemnity Insurance can be claimed on for this- no it can't- that's not its purpose. It would be Employer's Liability insurance which could be claimed on. This question tests your understanding of the different types of insurance. There is a very similar question in the exam- so remember accidents at work are claimed against Employer's Liability insurance NOT Professional Indemnity insurance - see p.96 for more information on different types of insurance

Explanation

Petra should arrange for additional tests to be conducted. This question is based on a real example in the exam. In this scenario there is still significant risk for Petra even if the supplier is testing the materials. The supplier could miss something, or forge the results with disastrous consequences for Petra's customers. Moreover it would severely damage Petra's reputation. Therefore the wise thing would be for Petra to conduct additional tests in-house to ensure they are happy with the products and only then accept them. This could be an audit of 10% of deliveries to ensure compliance. Acceptance Testing is discussed in the textbook on p.70

Explanation

ISO 28000 is Supply Chain Security Management. This is a known topic for the exam. Learn more about ISOs on p. 141

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The correct answers are as follows:

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The correct answers are as follows:

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