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CIPS L4M4 Exam Syllabus Topics:
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NEW QUESTION # 60
Which of the following can be interpreted as a normal business practice by some cultures but a form of bribery by others?
- A. facilitation payment
- B. phishing
- C. verbal contracts
- D. golden handshake
Answer: A
Explanation:
This is a facilitation payment. It's when a sum of money is given for 'helping to facilitate' a contract. E.g. a procurement manager may accept a facilitation payment from a supplier for selecting him to be a new supplier for a big contract.
In the UK this is definitely considered a bribe. It's also against the CIPS Code of Conflict
NEW QUESTION # 61
For what type of purchase would you use a Futures Exchange?
- A. Commodity
- B. Capital Expenditure
- C. Tail Spend
- D. High value, high risk
Answer: A
Explanation:
Futures exchanges are used to trade commodities. It's when a buyer and supplier agree a price and deal for something in the future. For example a carrot farmer may agree to sell his carrots to Gary in 3 months time when they're finished growing. It's used when the product / commodity isn't ready yet.
It's also used for hedging and other complex financial stuff- but you don't need to know that yet. Commodities and Future contracts are a big part of L5M4 to warn you though. Futures Contract Definition: Types, Mechanics, and Uses in Trading (investopedia.com)
NEW QUESTION # 62
Procurement professionals should never appoint any suppliers that have a low credit rating. Is this statement TRUE?
- A. No, because a credit rating is only one financial tool to be used in determining financial competence
- B. Yes, because this rating indicates poor financial management practices
- C. Yes, because this rating means that insolvency or liquidation is imminent
- D. No, because a credit rating is not an appropriate decision-making tool
Answer: A
Explanation:
A credit rating is one of many tools used to assess a supplier's financial health. Responsible sourcing requires a comprehensive assessment of suppliers, considering multiple factors, to ensure a balanced and ethical approach to supplier selection.
NEW QUESTION # 63
How can a buyer monitor a supplier's ethical workforce standards throughout a long-term contract?
- A. Request a completed self-assessment by the supplier on a monthly basis
- B. Contact management directly on a periodic basis, as stipulated in contract terms
- C. Check the International Labour Organisation's database regularly for information specifically about that supplier
- D. Commission periodic audits by specialist third parties to highlight any malpractice
Answer: D
Explanation:
Conducting periodic audits by third-party specialists is a reliable way to monitor compliance with ethical standards, as these audits provide an objective assessment. This aligns with ethical sourcing practices, as it promotes accountability and ensures continuous adherence to agreed-upon standards.
NEW QUESTION # 64
There are a number of models that can be used to appraise suppliers before commencing a full tendering process. Which of the following could be considered when appraising a supplier?
* Capacity
* Control
* Compatibility
* Commodity
- A. 2 and 3 only
- B. 1 and 3 only
- C. 2 and 4 only
- D. 1 and 2 only
Answer: B
Explanation:
Capacity and compatibility are critical factors in supplier appraisal. Evaluating these factors ensures that the supplier can meet the buyer's requirements in terms of production capacity and aligns with responsible sourcing by ensuring the supplier's values and practices are compatible with the buyer's expectations.
NEW QUESTION # 65
Amnesty International, Oxfam and CIPS are examples of what type of organisation?
- A. not-for-profit
- B. partnerships
- C. public limited companies
- D. limited liability
Answer: A
Explanation:
These are 'not-for-profit' organisations. You don't need to know much on not-for-profit procurement for this exam. Just that procurement can be regulated in this sector by bodies such as Charities Commission.
NEW QUESTION # 66
Tulip Rose Industries is using a restricted approach to tendering for a new contract for the facilities management of their seven factories which produce furniture made of organic materials. What is likely to be the reason they are using a restricted approach?
- A. interest in the tender opportunity is likely to be low
- B. interest in the tender opportunity is likely to be high
- C. the suppliers are likely to be unqualified
- D. the requirement is complex
Answer: B
Explanation:
you would use a restricted approach when interest is likely to be high. The buyer needs a method of de-selecting unsuitable bidders and creating a shortlist of acceptable organisations.
For complex requirements you could use both an open or restrictive tender- the difference between the approaches is about how many bids you're likely to get rather than the complexity of it.
NEW QUESTION # 67
A buyer is responsible for the procurement of metals within the raw materials department. The buyer is preparing for next year's purchase orders and has been asked to confirm the month of order placement. The buyer has found three trends:
* In January and April, the supplier's local currency is stronger
* November typically has the lowest demand
* May typically has the highest demand
Which month should the buyer plan to place the purchase order?
- A. April
- B. November
- C. May
- D. January
Answer: B
Explanation:
Ordering in November, when demand is lowest, may allow the buyer to secure better pricing and availability, aligning with responsible sourcing by optimizing purchase timing to achieve cost savings and reliable supply.
NEW QUESTION # 68
Which of the following should be considered when calculating ratios relating to a supplier's liquidity?
- A. profit
- B. receivables
- C. inventory
- D. reserves
Answer: C
NEW QUESTION # 69
A buyer has discovered their supplier has taken the passports of some of their workforce. The supplier has offered the buyer a discount against the contract, but the discount only applies if the buyer does not report this finding. Which ethical concerns should the buyer report to the necessary stakeholders?
* Fraudulent activity
* Bribery
* Modern slavery
* Breach of confidentiality
- A. 1 and 3 only
- B. 1 and 4 only
- C. 2 and 4 only
- D. 2 and 3 only
Answer: D
Explanation:
The withholding of passports is a potential indication of modern slavery, and the offer of a discount to avoid reporting this is a form of bribery. Reporting these ethical concerns aligns with responsiblesourcing practices and is critical for maintaining a supply chain free from human rights abuses.
NEW QUESTION # 70
Curly Cake Incorporated makes lots of different types of confectionary items. Although they are most famous for their cakes, they also have a smaller line of cereal bars and biscuits. Which of the following would be the most appropriate items for Curly Cake Incorporated to outsource? Select TWO
- A. cakes
- B. cereal bars and biscuits
- C. facilities management
- D. cleaning
Answer: C,D
Explanation:
Cleaning and Facilities Management are the most appropriate items to outsource. They would not outsource the making of confectionary products as this is the 'core' business.
See p.4 for "what is outsourcing?"
NEW QUESTION # 71
The use of Incoterms will eliminate all risks involved in international trade transactions. Is this statement true?
- A. Yes, they eliminate all the risks of buying from an overseas supplier
- B. No, they can reduce risks but will not eliminate them
- C. No, they will only provide assurance about the quality of goods
- D. Yes, they are popular because all risks are avoided
Answer: B
Explanation:
Incoterms clarify responsibilities between buyers and sellers, reducing certain risks but not eliminating them entirely. Responsible sourcing requires recognising that Incoterms are only part of risk management in international trade, and other factors, such as supplier reliability and quality, must be considered.
NEW QUESTION # 72
In which instance would multiple sourcing be the most applicable approach?
- A. Sourcing for components required at short notice
- B. Sourcing for the provision of a service, where close relationship management is required
- C. Sourcing a specialised, unique component where the supplier's knowledge is key
- D. Sourcing for high-cost, strategically important components
Answer: A
Explanation:
Multiple sourcing is particularly advantageous for ensuring quick delivery and preventing stock-outs, as it provides the flexibility to source from multiple suppliers. This approach aligns with responsible sourcing by ensuring continuity and reducing risks in the supply chain.
NEW QUESTION # 73
A company has a requirement for an item that has been identified as strategic on the positioning model. The company needs to invite competitive tenders and ensure the selected supplier of this item is in a good financial position. What should the company ask the suppliers to send to show that their current assets cover their current liabilities?
- A. Annual turnover
- B. Gearing ratio
- C. Acid test
- D. Profit and loss account
Answer: C
Explanation:
The acid test (quick ratio) is an effective measure of a supplier's ability to meet short-term liabilities, providing insights into financial stability. This aligns with responsible sourcing by ensuring the supplier is financially capable of fulfilling a strategic contract.
NEW QUESTION # 74
Philip is a procurement manager at XYZ Company which imports raw materials from abroad. Sup-pliers provide quotes to Philip in their local currency. Is this the best way to reduce the risk to XYZ Company of currency fluctuations?
- A. yes- this puts the risk on the supplier
- B. no- quoting in the supplier's currency does not affect the risk to the buying organisation
- C. no- quoting in the supplier's currency increases the risk for the buyer
- D. yes- this means the price won't go up or down
Answer: C
Explanation:
The correct answer is 'no- quoting in the supplier's currency increases the risk for the buyer'. This questions comes up in a variety of formats in the exam. Remember; if the price is in your own currency (most examples in the exam are given in £) there is less risk than if the prices are quoted in a foreign currency. This is because exchange rates fluctuate; if the price is in £ you always know what you're paying, if it's in another currency the price can change daily depending on if the exchange rate compared to £ has gone up or down.
NEW QUESTION # 75
Which of the following is an advantage to the TUPE regulations?
- A. Reduced overheads for the buying organisation
- B. Increase in buyer power
- C. Continuity of supply for the buying organisation
- D. Value for money for the buying organisation
Answer: C
Explanation:
Continuity of supply for the buying organisation is an advantage of TUPE regulations.
TUPE is the Transfer of Undertakings (Protection of Employment). It's when the workforce / em-ployees of one company go to work for another one, usually after their company is bought out. They're transferred to the new company along with the furniture and buildings.
TUPE is UK specific. You don't need to know too much details about it for this exam - just what it is and the benefits. The main benefit is people don't lose their jobs when their company gets bought out. Basic guide to TUPE (pinsentmasons.com)
NEW QUESTION # 76
What type of relationship should a buyer seek when making strategic sourcing for their business?
- A. arms-length
- B. partnership
- C. transactional
- D. collaborative
Answer: D
Explanation:
The buyer should seek a 'collaborative' relationship. Transactional and arms-length relationships are more suited to tactical sourcing. Partnerships are reserved for joint-ventures.
NEW QUESTION # 77
When conducting an ABC analysis- what category of items and type of suppliers would you typically find in the A category?
- A. low value items, transactional suppliers
- B. high value items, strategic suppliers
- C. high value items, transactional suppliers
- D. low value items, strategic suppliers
Answer: B
Explanation:
A Category spend is high value and strategic suppliers. C category is low value, high volume of spend aka tail spend. The bits in the middle are B category.
For example when you have a baby you have to buy lots of stuff for it. Your A spend is the big, important and expensive purchases like the pram, cot, carseat. You spend a lot of time in this category because they're important purchases you want to get right. The Tail Spend / C are all the little bits like nappies, baby shampoo, sippy cups. The B category are the bits in between - the purchases are kinda important but aren't as strategic or important as A category. Toys may fall into this category.
NEW QUESTION # 78
A buyer has been working with their business managers on a tender. The buyer is now assessing the tender proposals from the external market. Is it good practice for the procurement buyer to makesourcing recommendations?
- A. Yes, the procurement buyer should assess and take all decisions to award the tender independently of the business managers to avoid conflict of interest
- B. No, the buyer's recommendations are not relevant to the final sourcing decision, which must be taken by the business managers
- C. No, it is a lengthy, costly, and unnecessary step for the procurement buyer to engage business managers
- D. Yes, the procurement buyer can advise on the competitive proposal but should engage with the business managers about the decision to award the tender
Answer: D
Explanation:
Engaging with business managers while making sourcing recommendations ensures that the buyer considers multiple perspectives, reducing potential biases and improving decision-making. This approach aligns with ethical sourcing practices by promoting collaboration and transparency in tender decisions.
NEW QUESTION # 79
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