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CIPS
CIPS Level 4 Diploma in Procurement and Supply
L4M4
Ethical and Responsible Sourcing Questions and Answers

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Viewing questions 31-40 out of questions

Questions # 31:

Robert is appraising suppliers and is keen to evaluate suppliers' contribution to the community and the environment. Which of the following should Robert look at?

Options:

ESG Policy

Anti-Slavery Policy

ISO9001

ISO27000

Answer

Explanation

Robert should look at the supplier's ESG policy. This stands for Environmental Social Governance. So covers both his requirements for community (social) and environmental factors.

ISO 9001 is about Quality Management and ISO27000 about Information Security so these are in-correct answers. An Anti-Slavery Policy would not discuss the environment.

Questions # 32:

A buyer for a large manufacturing organisation is assessing a sole supplier tender opportunity. The buyer is finding it challenging to differentiate the proposals on unit purchase price. Are there any added values that the procurement manager can use to leverage the sole supplier proposal?

Options:

Yes, but only if the buyer decides to re-start the tender opportunity

No, the buyer must make the decision based on the existing information

No, because a buyer has no leverage over a sole supplier

Yes, the buyer can negotiate on aspects such as after-sales service

Answer

Explanation

In cases where price differentiation is minimal, negotiating on added-value services like after-sales support can offer additional benefits. This aligns with responsible sourcing by focusing on long-term value and fostering a cooperative relationship with the supplier.

Questions # 33:

When assessing social responsibility elements of a supplier's proposal, what type of supporting evidence could a supplier provide?

Options:

Evidence of compliance with fair trade standards

Results of a customer service survey on delivery performance

Quality control reports documenting quality checks in the manufacturing process

Financial statements detailing profit and loss accounts

Answer

Explanation

Compliance with fair trade standards demonstrates the supplier's commitment to social responsibility, including fair wages and ethical working conditions. This aligns with responsible sourcing practices, ensuring that suppliers maintain ethical labor standards, as advocated in the principles of ethical sourcing.

Questions # 34:

Which of the following financial documents would show whether a supplier has sufficient funds to pay their subcontractors in the short term?

Options:

balance sheet

ESG policy

profit and loss account

cash flow statement

Answer

Explanation

A cash flow statement shows the money coming in and out. This would therefore show whether a supplier has enough money coming in, to be able to pay some of it out to a subcontractor.

P&L and Balance Sheets look more broadly at finances, rather than saying what's physically in the bank at a specific given time.

Do learn the difference between these three financial documents for the exam.

Balance Sheet: Explanation, Components, and Examples (investopedia.com)

Profit and Loss Statement Meaning, Importance, Types, and Examples (investopedia.com)

Cash Flow Statement: How to Read and Understand It (investopedia.com)

Questions # 35:

Which of the following would you use to work out a company's gearing ratio? Select TWO.

0current liabilities

Options:

net profit

shareholder equity

long term debt

gross sales

Answer

A, C

Explanation

Gearing measures how much of an organisation's long-term funding is made up of long term debt and loans. Therefore the correct answers are 'shareholder equity' and 'long term debt'.

There are many question about financial ratios that can come up on the exam. If you're unsure on them I suggest doing further reading outside of the study guide as this will help. I like this youtube video (I'm not associated with the makers of this video but think they're really good at explaining things to beginners) Gearing Ratio explained (youtube.com)

Questions # 36:

Credit rating agencies can assist procurement professionals. Typically, which of the following can be obtained from a credit rating agency report? Select TWO that apply.

Options:

Product pricing information

Payment history

Financial stress score

Tender submission pricing

Rebate information

Answer

B, C

Explanation

Payment history and financial stress scores provide insights into a supplier’s financial health and stability. This information is crucial for procurement professionals in assessing whether a supplier can fulfill long-term commitments, supporting responsible sourcing by mitigating financial risks.

Questions # 37:

Under what circumstances can a buyer reduce timescales for a tender in the Public Sector?

Options:

if tenders are received by electronic submission exclusively

if the competition is restricted

if there are fewer than 5 bidders

when the tender is of low value

Answer

Explanation

If tenders are received by electronic submission exclusively, the buyer can reduce the timescale. On average the time for a standard tender submission can be reduced by 5 days if bids are submitted electronically.

*Note* this is based off current PCR Regs 2015 which are being superseded in October 2024 by new legislation. We currently don't know what the new regs will say on this. If it's different, my best guess is CIPS will remove any question about it from their exam- because the study guide would be wrong and that would lead to complaints.

Questions # 38:

Private sector procurement organisations should always allow suppliers at least 35 days to respond to invitations to tender. Is this statement true?

Options:

No, because this timeframe will cause delays that are unacceptable to stakeholders

Yes, because it helps suppliers to plan and prioritise their work

No, because the complexity of the tender should inform the response timescale

Yes, because that timeframe is internationally recognised as being appropriate

Answer

Explanation

Response times should be tailored to the complexity of the tender. Responsible sourcing encourages flexibility in setting realistic timelines that allow suppliers adequate time to prepare, supporting efficient and effective sourcing without unnecessary delays.

Questions # 39:

Rules regulating the type of goods and the volume that can be imported into a country or trade block are commonly known as what?

Options:

duties

profits

tariffs

laws

Answer

Explanation

This is tariffs. Be careful not to confuse tariffs and duties;

tariffs = rules and duties = payments.

Questions # 40:

What course of action should be taken when an audit of a supplier identifies evidence of human rights malpractice?

Options:

Immediately raise the issue with the supplier and jointly develop a timely action plan to be implemented before a repeat audit

Immediately halt all orders with the supplier, make a record of the violation in the supplier database, and switch to an alternative source of supply

Remove all business and inform press organisations, who will in turn bring the issue to the attention of formal governmental organisations who can take action

Allow the supplier to complete current orders placed, while pursuing an alternative source to change to as soon as approved

Answer

Explanation

Addressing human rights issues collaboratively by developing an action plan allows for improvement and correction. This approach is consistent with ethical sourcing principles, which encourage responsible intervention to correct and improve supply chain practices rather than punitive measures that may not lead to long-term change.

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