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CIPS Ethical and Responsible Sourcing Sample Questions (Q131-Q136):
NEW QUESTION # 131
In which instance would multiple sourcing be the most applicable approach?
- A. Sourcing for components required at short notice
- B. Sourcing for high-cost, strategically important components
- C. Sourcing a specialised, unique component where the supplier's knowledge is key
- D. Sourcing for the provision of a service, where close relationship management is required
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 # 132
Why would you use a credit score to appraise a supplier?
- A. to find out if the supplier has any unethical business practices
- B. to understand if their prices reflect market value
- C. to understand the level of risk the supplier poses to your organisation
- D. to find out how much money the supplier has in the bank
Answer: C
Explanation:
A credit rating generates a score which reflects 'the level of risk an organisation poses when dealing with other businesses'. It's saying how risky it is to loan them money or do business with them by looking at how good they are at paying people. So a high credit rating will say they're good at paying back their loans and paying their suppliers on time. A poor credit rating will say they often miss payments or pay late.
A credit rating will not tell you how much money they have, or details on their prices. Credit scores looks at purely financial data so wouldn't help you analyse whether their business practices are ethical or not.
NEW QUESTION # 133
What are the two main financial accounting statements of an organisation that show values of assets/liabilities and profit earned?
- A. Balance sheet & profit and loss account
- B. Cash flow statement & profit and loss account
- C. Cash flow statement & balance sheet
- D. Profit and loss account & chairman's statement
Answer: A
Explanation:
The balance sheet (statement of financial position) shows assets, liabilities, and equity at a point in time. The profit and loss account (income statement) shows revenues, expenses, and profit over a period. These are the two core statements used to assess supplier stability and performance. The cash flow statement is useful but supplementary, while chairman's statements are narrative, not financial records. Responsible sourcing emphasises using balance sheet and P&L analysis to evaluate supplier financial strength, ensuring continuity of supply and risk management.
Reference: CIPS L4M4 Study Guide (v2), LO: "Application" - financial statements and supplier evaluation.
NEW QUESTION # 134
Khalid is a procurement manager in the UK who is looking to source exotic fruit for a retailer. As this type of fruit doesn't grow naturally in the UK Khalid is looking at international suppliers, but is worried about variations in exchange rates. He is considering asking the suppliers to provide quotes in their local currencies.
Will this reduce the risk posed to Khalid?
- A. no- quoting the prices in GBP / £ will provide Khalid with better security against cur-rency fluctuations
- B. yes- when suppliers quote in local currencies you are more likely to get better prices
- C. no- prices should be quoted in GBP / £ as this will reduce the cost of imports
- D. yes- suppliers should quote in their own currencies so there is no risk to the importing company
Answer: A
Explanation:
So you can immediately discount the options starting with yes.
Quoting in GBP / £ rather than the supplier's currency reduces the risk to the buyer. It will not re-duce the cost of the import, and will probably increase it as the supplier is then taking on the risk of currency fluctuations.
NEW QUESTION # 135
A business may be faced with the challenge of deciding whether to source some of its requirements from external suppliers or whether to make them internally. Which of the following factors is likely to justify the decision to make the requirements internally?
- A. The availability of in-house competencies and capacity to carry out the production
- B. The other suppliers are using older technology
- C. External suppliers are likely to be overcharging
- D. External sourcing involves cumbersome tendering procedures
Answer: A
Explanation:
Internal production is often justified when a company has the necessary competencies and capacity. This approach aligns with responsible sourcing by leveraging internal capabilities for better control over quality, cost, and compliance with ethical and environmental standards.
NEW QUESTION # 136
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