Test Online Free CIPS L5M2 Exam Questions and Answers
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Risk Management is a process with several steps.
Which of the following is the last step of the cycle?
Answer: Explanation:
monitor and review is the last stage. The full cycle is; establish context - identify risks - analyse and evaluate risks - treat -communicate and consult - monitor and review. See p. 142
Question 2Selectable Answer
The CBCI and DBCI are professional qualifications in which area?
Answer: Explanation:
These are qualifications in business continuity. This comes from p.107 of the study guide. CBCI stands for Certificate of the Business Continuity Institute and DBCI Diploma of the Business Continuity Institute. Once you know what the acronyms stand for, the question is quite easy!
Question 3Selectable Answer
John is a mid-level manager and has created a risk / reward matrix about four potential opportunities at his company White Ducky Limited. He will present his research to a board meeting next week. He has categorised the four opportunities as the following.
Which of these opportunities should John recommend the board 'consider'? Select TWO.
Answer: Explanation:
High risk/ high reward, and low risk/ low reward are the options that should be CONSIDERED. This is according to the risk/ reward matrix on p. 6. Items that are low risk/ high reward should be PROGRESSED and items which are high risk / low reward should be AVOIDED.
Question 4Selectable Answer
Petra Ltd is a manufacturer of upmarket baked goods and they have a range which is gluten free and therefore suitable for customers who have an intolerance of wheat. For this reason Petra Ltd is very strict about the ingredients that it sources. It's main supplier has provided written agreement that they will test all ingredients in their processing factory to ensure that they are suitable for the gluten free diet before delivery is made, and once delivery is made the materials will be deemed accepted by the buyer.
Is Petra right to accept this arrangement?
Answer: 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
Question 5Selectable Answer
In which of the following industries is it common to find dedicated resource for risk management?
Answer: Explanation:
Banking and Insurance industries usually have a dedicated resource. This mean people working within the company are dedicated to this role (as opposed to using a third party). P. 146
Question 6Selectable Answer
What is ISO28000?
Answer: Explanation:
ISO 28000 is Supply Chain Security Management. This is a known topic for the exam. Learn more about ISOs on p. 141
Question 7Selectable Answer
What is the purpose of the Sarbanes-Oxley Regulation?
Answer: Explanation:
Sarbanes Oxley Regulations encourages transparency in financial reporting. The regulations came in response to the Enron scandal in 2001 when Enron bosses were falsifying financial records to make the company look better than it was, then the company went bust. The point of Sarbanes Oxley is to ensure that this doesn't happen again- that business leaders report correct financial statements to shareholders. The study guide talks about this on p.42 but I'd recommend also watching this video as it gives a good background to the regulation: https://www.investopedia.com/terms/s/sarbanesoxleyact.asp
Question 8Selectable Answer
Which of the following statements about binomial distribution are true? Select THREE
Answer: 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: https://www.youtube.com/watch?v=3EZbX2ftCUk - it's a very memorable example and really helped me. You can also see more info in the cips textbook p.131
Question 9Selectable Answer
Which of the following is an internal risk for a company?
Answer: Explanation:
Lack of personnel is an internal risk- the others are external risks. Internal and external risks is a known topic for the exam so see p.116-117 for more information
Question 10Selectable Answer
Which of the following statements about normal distribution are correct? Select TWO
Answer: Explanation:
1 and 5 are correct- it is the most common type of distribution and it looks like a bell curve when it's drawn as a graph. There's one on p.127 to look at. The other three statements are incorrect- it's a bell shape rather than a curve, it requires a large number of data points and most of the data points correlate around the middle.
Question 11Selectable Answer
Which of the following will you put into box 6?
Answer: Explanation:
Table
Description automatically generated
The company should ensure they have the correct levels of Employer's Liability insurance as staff are getting injured. This transfers the risk to the insurance company. (I mean they should probably do something to stop the staff getting hurt too... but this is just an imaginary example question....)
Question 12Selectable Answer
Which of the following is not an internal risk for a business who imports raw materials from abroad?
Answer: 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)
Question 13Selectable Answer
Which of the following will you put into box 6?
Answer: Explanation:
The correct answers are as follows:
Table
Description automatically generated with low confidence
Question 14Selectable Answer
Which of the following is an International Standard for Risk Management?
Answer: Explanation:
Risk Management = ISO31000. Learn the ISOs for the exam as it's a popular exam topic. 31000 is explained on p. 140. As well as the numbers, you should also learn the guiding principles of each ISO for the exam.
Question 15Selectable Answer
Jan is a chef who has created a new type of curry. She is worried that another chef may steal her curry recipe so is wanting to protect this.
Which type of IP protection should Jan take out?
Answer: Explanation:
Trade secrets are used for recipes- they're suitable for confidential information that gives an organisation a competitive edge. For a detailed explanation of the four types of IP cover see p. 64 of the study guide
