CIPS L5M2 Managing Supply Chain Risk Exam Practice Test

Explanation

A Business Continuity Plan is held at the top level. See p. 155

Explanation

A Disaster Recovery Plan is to get critical systems operational following an emergency. This is implemented hours after the event. Option 2 describes Incident Response and Option 3 describes a Business Continuity Plan. Option 4 is made up. These definitions and the timeline of when they're activated is on p.108 of the study guide

Explanation

This is 'contingent business interruption' insurance. This protects you if anything were to happen to your suppliers' premises. Business Interruption Insurance would cover you if something were to happen to your premises. See p.99

Explanation

Insurance is a form of hedging. Hedging is using a financial instrument to offset the potential risk of an adverse loss (p.93) none of the other options mentioned are financial instruments.

Explanation

Advantages of ISO28000 are competitive advantage and cost savings. The textbook explains that cost savings come through a reduction in security incidents. For more info on ISO28000 see p. 141

Explanation

0.5 - in probability theory, the likelihood of an event is represented as a number between 0 and 1. Therefore this would be written as 0.5. See p. 125

Explanation

They will receive operational help from a third party is the correct answer. Unlike insurance, a contingency plan provides operational help, not just financial. This could be in providing an emergency workspace, helping to get IT systems back up and running or providing emergency air freight. This is explained on p.91-92 of the study guide

Explanation

The correct answers are as follows:

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Explanation

1, 3 and 4 are the correct options. Binomial is based on discreate events not continuous and it assumes the events of each trial are independent of one another. This YouTube video explains it all perfectly using the chance that an ice-cream cone is broken. It's a nice memorable example to help you remember what binomial distribution is and how it works: - it 's a very memorable example and really helped me. You can also see more info in the cips textbook p.131

Anything to do with currency is a financial risk.

Explanation

The correct order is 2, 1, 3 - this is from p.108 of the study guide: 'The Components of a Business Continuity and Disaster Recovery Plan'.

Explanation

Indemnity clauses transfer risk from one party to another. It is an arrangement whereby one party promises to compensate the other party for a trigger event. An example of an indemnity clause could be a construction firm is building a new bridge and the project is supposed to be completed by 1st June. An indemnity clause may state that should the bridge not be ready by this date, the construction firm will compensate the buyer by X amount. See p.61 for more information on indemnity.

Explanation

The correct answers are as follows:

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Explanation

changes to import levies is an external risk. Not internal. See p.118-119 for more information on internal risks - this is a popular exam topic. Internal risks are stuff that happens inside a company, external risks are risks from the external environment (whether this is political, economical, weather etc)

Explanation

This is used to engage stakeholders in the development of risk assessments. P. 137-138

Explanation

The correct answers are as follows:

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Explanation

The first three sentences are true about ISO 31000. The list of the 11 principles are from p. 140. ISO 3100 is a known exam topic.

Explanation

Poisson Distribution would be used for this. Poisson Distribution predicts the likelihood of an event occurring. This is explained on p. 129 of the study guide but this YouTube video explains it a lot better: