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CIPS L5M6 Exam Syllabus Topics:
Topic
Details
Topic 1
Topic 2
Topic 3
CIPS Category Management Sample Questions (Q20-Q25):
NEW QUESTION # 20
Caleb is completing a risk assessment on his supply chain using a matrix categorising risks on a scale of 1-5.
He identifies one risk with a score of 2. Which category of risk would this fall into?
Answer: D
Explanation:
Risk assessments in procurement often use a likelihood × severity matrix. Risks are scored on scales from 1-
5, and the scores are multiplied. A score of 2 indicates a minor risk with low impact and/or low probability.
For comparison, risks with scores in the upper range (e.g., 20-25) are considered major risks that demand immediate mitigation. Minor risks, although not ignored, are often monitored rather than heavily resourced.
This structured approach ensures procurement teams focus resources on the most significant threats while still maintaining oversight of low-level risks. By categorising risks this way, category managers create clarity for decision-makers and align procurement risk management with enterprise-wide frameworks.
Reference: CIPS L5M6 Study Guide, p.56
NEW QUESTION # 21
In which section of a balance sheet would you find the term "goodwill"?
Answer: B
Explanation:
Goodwill is found under Non-current assets in a balance sheet. Goodwill arises when one company acquires another for a value greater than its tangible assets, reflecting intangible benefits such as brand reputation, customer loyalty, patents, or strong supplier relationships.
For example, if a company is valued at £10 million based on tangible assets but is purchased for £15 million, the £5 million difference is recorded as goodwill. This asset remains on the balance sheet until impaired [e.g., if the acquired brand loses value].
It is not a current asset because it cannot be quickly liquidated within one year. Nor is it a liability [current or non-current] since it represents value, not debt.
For procurement and category managers, goodwill can signal a supplier's market position, brand strength, and long-term stability. It highlights how intangible assets, though harder to measure, play a role in supplier evaluation and business acquisitions.
[Ref: CIPS L5M6 Study Guide, p.183 - Financial terms and balance sheet analysis]
NEW QUESTION # 22
Total Cost of Ownership [TCO] is important in Category Management. Steve is sourcing machine parts and IT systems.
Which of the following should Steve consider as part of TCO?
Answer: A,D,E
Explanation:
Total Cost of Ownership [TCO] refers to the full cost of acquiring, operating, and maintaining an item over its entire lifecycle-not just the purchase price. For Steve, the relevant elements are:
* Purchase Price [A]: The initial acquisition cost.
* Maintenance and Downtime [D]: Costs of repairs, spare parts, and losses during equipment downtime.
* Training [E]: Expenses incurred in training staff to use new systems or equipment.
By contrast, Location and Supplier Relationship are important considerations but cannot be quantified as direct financial costs in the same way.
The TCO model is often illustrated as the Cost Iceberg, where the purchase price is only the visible tip, while hidden costs [e.g., energy use, repairs, obsolescence, disposal] represent the bulk. Understanding TCO enables procurement to make more informed decisions, ensuring long-term value rather than focusing narrowly on upfront cost.
[Ref: CIPS L5M6 Study Guide, p.9 - TCO and the Cost Iceberg]
NEW QUESTION # 23
In a marketplace where there is a large number of suppliers, which of the following is true?
Answer: C
Explanation:
When many suppliers exist, buyers have multiple options, increasing their bargaining power. Suppliers must compete for contracts, shifting power toward the buyer.
[Ref: CIPS L5M6 Study Guide, p.112 - Porter's Five Forces: Buyer Power]
NEW QUESTION # 24
What can the IACCM help a Category Manager with?
Answer: A
Explanation:
The International Association for ContractCommercial Management [IACCM], now known as WorldCC, provides frameworks to help organisations select the most suitable sourcing and contracting models. For category managers, this is particularly valuable when deciding whether a transactional, relational, or investment-based model best fits the organisation's needs.
It does not directly choose suppliers or perform market analysis; rather, it guides decision-makers on the structural relationship with suppliers. For example, IACCM provides tools to decide whether to adopt outcome-based contracts, performance partnerships, or traditional transactional agreements.
Benchmarking may be a separate exercise, but sourcing models determine the governance and risk-sharing approach that underpins supplier relationships.
CIPS encourages procurement professionals to be familiar with IACCM's role, as it reinforces the need for strategic selection of sourcing models rather than a one-size-fits-all approach.
[Ref: CIPS L5M6 Study Guide, p.31 - IACCM and sourcing model selection]
NEW QUESTION # 25
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