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A procurement organisation decides to hold buffer stock for a critical component sourced from a single overseas supplier. This is an example of which supply chain risk management strategy?
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2026 Statistics
Key Facts: CIPS Level 5 Advanced Diploma Exam
70%
OR Module Passing Score
CIPS Level 5 examination regulations
90 min
Per OR Module Time Limit
CIPS Level 5 module specifications
6 modules
Total Qualification Modules
CIPS Advanced Diploma structure
2 essay
Constructed Response Modules (L5M1, L5M4)
CIPS module assessment types
100
Free Practice Questions Here
OpenExamPrep
The CIPS Level 5 Advanced Diploma Objective Response modules are computer-based exams of approximately 40–50 multiple-choice questions per module, with a 90-minute time limit and a 70% passing score. Core OR modules are L5M2 (Managing Supply Chain Risk), L5M3 (Managing Contractual Risk), and L5M5 (Managing Ethical Procurement and Supply). Electives include L5M6 Category Management, L5M7 Achieving Competitive Advantage, L5M8 Project and Change Management, L5M9 Operations Management, L5M10 Logistics Management, and L5M15 Advanced Negotiation. L5M1 and L5M4 use a Constructed Response essay format and are excluded from this bank.
Sample CIPS Level 5 Advanced Diploma Practice Questions
Try these sample questions to test your CIPS Level 5 Advanced Diploma exam readiness. Each question includes a detailed explanation. Start the interactive quiz above for the full 100+ question experience with AI tutoring.
1A procurement manager is mapping supply chain risks for a critical component sourced from a single overseas supplier. Which technique involves scoring risks by likelihood and impact to prioritise them for treatment?
A.Risk matrix assessment
B.Spend analysis
C.Failure Mode and Effects Analysis (FMEA)
D.Kraljic portfolio analysis
Explanation: A risk matrix plots likelihood against impact to produce a risk score, enabling teams to prioritise which risks require immediate treatment. This is a fundamental tool in the CIPS L5M2 supply chain risk management framework and is used to distinguish between high-priority risks that need mitigation and lower-priority ones that can be monitored.
2Which of the following is classified as an EXTERNAL supply chain risk?
A.A key supplier's factory destroyed by an earthquake
B.Poor internal demand forecasting leading to excess inventory
C.Inadequate supplier performance management processes
D.Failure to conduct due diligence on new suppliers
Explanation: External supply chain risks arise from events outside an organisation's control, such as natural disasters affecting a supplier's facility. An earthquake destroying a factory is a classic exogenous shock. CIPS L5M2 distinguishes external risks (environmental, geopolitical, natural events) from internal risks (process failures, poor governance).
3A business continuity plan (BCP) for procurement should primarily ensure which of the following?
A.Critical procurement activities can continue or be restored quickly after a disruption
B.Cost savings of at least 10% are achieved during a disruption
C.All supplier contracts are renegotiated when a disruption occurs
D.The procurement team is reduced in size to cut costs during recovery
Explanation: A Business Continuity Plan for procurement focuses on maintaining or rapidly restoring critical sourcing and supply activities following a disruption. CIPS L5M2 emphasises that BCPs must identify critical activities, recovery time objectives, and alternative supply arrangements to minimise the impact on the organisation.
4In the context of supply chain vulnerability, the 'supply chain mapping' technique is used to:
A.Identify all tiers of suppliers, flows, and dependencies to expose risk exposure
B.Calculate the total landed cost of imported goods
C.Negotiate lower unit prices by aggregating volumes across all suppliers
D.Allocate procurement spend across different categories of goods
Explanation: Supply chain mapping provides a visual representation of all suppliers, sub-suppliers, flows of goods, information, and finance across supply chain tiers. CIPS L5M2 uses mapping to uncover hidden dependencies, single-source vulnerabilities, and geographic concentrations that create risk exposure the buying organisation may not have been aware of.
5Which risk mitigation strategy involves deliberately using more than one source of supply for a critical component?
A.Risk transfer
B.Risk avoidance
C.Dual or multiple sourcing
D.Risk retention
Explanation: Dual or multiple sourcing is a supply chain risk mitigation strategy that reduces dependence on a single supplier. If one source fails, alternative suppliers can fulfil demand. CIPS L5M2 identifies this as one of the most direct structural responses to supply risk, particularly for strategic or bottleneck items.
6A contract contains an indemnity clause whereby Supplier X agrees to indemnify the buyer against all losses arising from defective products. What is the legal effect of this clause?
A.It transfers the financial risk of defective products from the supplier to the buyer
B.It makes the buyer liable for any third-party claims arising from use of the product
C.It obligates the supplier to compensate the buyer for losses caused by the supplier's defective products
D.It limits the supplier's maximum liability to the contract value
Explanation: An indemnity clause creates a primary obligation on the indemnifying party to compensate the other party for specified losses. When the supplier indemnifies the buyer against losses arising from defective products, the supplier must bear those financial losses. CIPS L5M3 treats indemnities as a key contractual risk-transfer mechanism distinct from limitation of liability clauses.
7Which of the following best describes the purpose of a limitation of liability clause in a commercial contract?
A.To cap the maximum financial exposure of one or both parties to an agreed amount
B.To exclude all liability of either party for any breach of contract
C.To transfer liability to a third-party insurer automatically
D.To extend the statutory rights of the buyer beyond those provided by law
Explanation: A limitation of liability clause sets a ceiling on the amount one party can recover from the other, typically linked to contract value or insurance limits. CIPS L5M3 emphasises that these clauses must be reasonable and clearly drafted; under the UK Unfair Contract Terms Act 1977, exclusion of liability for negligence causing death or personal injury is not permitted.
8Under a model form contract such as the NEC4 Engineering and Construction Contract, what is the purpose of the 'early warning' mechanism?
A.To notify the other party of any matter that could affect cost, time, or quality, prompting collaborative problem-solving
B.To give the supplier the right to terminate for convenience without penalty
C.To automatically adjust the contract price when material costs increase
D.To provide the buyer with an option to accept or reject defective work
Explanation: The NEC4 early warning mechanism requires parties to notify each other of any matter that could adversely affect cost, time, or quality as soon as they become aware of it. The aim is collaborative, proactive risk management rather than adversarial claim-filing after the event. CIPS L5M3 uses NEC as an example of a model form that embeds relationship-based risk management.
9An organisation requires its suppliers to hold product liability insurance as a condition of the contract. From a contractual risk perspective, this requirement primarily serves to:
A.Ensure a financially capable third party (insurer) can meet claims arising from supplier-caused harm
B.Increase the buyer's exposure to supplier insolvency risk
C.Transfer the ownership of intellectual property from the supplier to the buyer
D.Reduce the buyer's obligation to inspect incoming goods
Explanation: Requiring a supplier to hold adequate product liability insurance ensures that if a third party makes a claim arising from the supplier's defective product, there is an insurer with sufficient capacity to respond. CIPS L5M3 treats insurance requirements as a key element of contractual risk allocation, complementing indemnity clauses.
10The CIPS Code of Ethics requires members to 'enhance and protect the standing of the profession'. Which behaviour BEST exemplifies a breach of this principle?
A.Accepting a hospitality gift well above the organisation's gifts policy threshold and not declaring it
B.Disclosing a conflict of interest before participating in a supplier selection decision
C.Reporting a colleague's suspected misconduct to a line manager
D.Seeking competitive bids for a high-value purchase to ensure best value
Explanation: Accepting a gift that exceeds the organisation's declared threshold without disclosure is a clear breach of the CIPS Code of Ethics. It creates an undisclosed conflict of interest, undermines trust, and damages the profession's standing. CIPS L5M5 emphasises that members must follow their organisation's gifts and hospitality policy and proactively declare conflicts.
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