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NEW QUESTION 31
Interserve is a construction contractor in UK. When receiving a huge and complex project, Inter-serve’s procurement manager assesses the risks by quantifying them and recommends other stake-holders to plan mitigating actions. Is the procurement manager’s action justified?

  • A. No, because embedding the risk into pricing will decrease the company’s competitiveness
  • B. Yes, because procurement manager needs to assess the risks to prioritise and mitigate any potential risks
  • C. Yes, because all the risks should be quantified and eliminated completely before they happen
  • D. No, because no risks can be quantified, therefore the procurement manager’s action is impossible.

Answer: B

Explanation:
Assessing the risks by quantifying them should be done. Even with qualitative risk assessment, quantifying is still important since risks need to be prioritised.
Risk assessment can be qualitative or quantitative. Perform qualitative and perform quantitative risk analysis are two processes within the project risk management knowledge area, in the planning process group. While qualitative risk analysis should generally be performed on all risks, for all projects, quantitative risk analysis has a more limited use, based on the type of project, the project risks, and the availability of data to use to conduct the quantitative analysis.
Qualitative Risk Analysis
A qualitative risk analysis prioritises the identified project risks using a pre-defined rating scale. Risks will be scored based on their probability or likelihood of occurring and the impact on project objectives should they occur.
Probability/likelihood is commonly ranked on a zero to one scale (for example, .3 equating to a 30% probability of the risk event occurring).
The impact scale is organizationally defined (for example, a one to five scale, with five being the highest impact on project objectives – such as budget, schedule, or quality).
A qualitative risk analysis will also include the appropriate categorization of the risks, either source-based or effect-based.
Quantitative Risk Analysis
A quantitative risk analysis is a further analysis of the highest priority risks during a which a numerical or quantitative rating is assigned in order to develop a probabilistic analysis of the project.
A quantitative analysis:
– Quantifies the possible outcomes for the project and assesses the probability of achieving specific project objectives
– Provides a quantitative approach to making decisions when there is uncertainty
– Creates realistic and achievable cost, schedule or scope targets
In order to conduct a quantitative risk analysis, you will need high-quality data, a well-developed project model, and a prioritized lists of project risks (usually from performing a qualitative risk analysis).
Reference:
LO 3, AC 3.3

 

NEW QUESTION 32
Why should procurement professionals develop business case before seeking approval to purchase capital equipment?

  • A. Business case is a tool that eliminates all risks associated with the project
  • B. Using business case will prevent new entrants from entering the supply market
  • C. Devising business case may prompt the procurement to consider different options
  • D. A business case can be used as a replacement of purchase order

Answer: C

Explanation:
A business case is developed during the early stages of a project and outlines the why, what, how, and who necessary to decide if it is worthwhile continuing a project. One of the first things you need to know when starting a new project are the benefits of the proposed business change and how to communicate those benefits to the business.
Preparing the business case involves an assessment of:
– Business problem or opportunity
– Benefits
– Risk
– Costs including investment appraisal
– Technical solutions
– Timescale
– Impact on operations
– Organizational capability to deliver the project outcomes
These project issues are an important part of the business case. They express the problems with the current situation and demonstrate the benefits of the new business vision. Making business case with multiple options and choices also prompts the procurement and senior management to consider alternatives. As a result, the organisation may opt out the best option.
The business case brings together the benefits, disadvantages, costs, and risks of the current situa-tion and future vision so that executive management can decide if the project should go ahead.
Reference:
– CIPS study guide page 19-21
– How to Write a Business Case – Template & Examples | Adobe Workfront
LO 1, AC 1.1

 

NEW QUESTION 33
Which of the following areas is specified by ISO/IEC 27001 family?

  • A. Evaluation and assessment of mutual agreed customer food safety requirements
  • B. The requirements for an environmental management system
  • C. The dimensions and associated tolerances for a series of housings for piston seals
  • D. The requirements for an information security management system

Answer: D

Explanation:
ISO/IEC 27001 is widely known, providing requirements for an information security management system (ISMS), though there are more than a dozen standards in the ISO/IEC 27000 family. Using them enables organizations of any kind to manage the security of assets such as financial infor-mation, intellectual property, employee details or information entrusted by third parties.
LO 3, AC 3.1

 

NEW QUESTION 34
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