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CIPS L4M4 Exam Syllabus Topics:

Topic	Details
Topic 1	Understand the key processes that can be applied to the analysis of potential external suppliers:
Topic 2	This section examines analyzing market data, obtaining quotations tenders, and assessing responses. The sub-topics focus on key processes for evaluating potential suppliers.
Topic 3	Understand options for sourcing requirements from suppliers: This section covers the sourcing process, approaches, options, and award criteria for obtaining requirements from suppliers. The sub-topics provide a foundation for strategic sourcing.
Topic 4	Understand compliance issues when sourcing from suppliers: It explores legislative, regulatory, and organizational requirements for sourcing. It compares the use of audit and other mechanism of feedback.

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CIPS Ethical and Responsible Sourcing Sample Questions (Q68-Q73):

NEW QUESTION # 68
A buyer of bakery products sees wheat shortages due to poor harvests but demand remains high. How does this affect negotiation?

A. Buyer is in a strong position to reduce prices
B. Bakery produce will be lower priced as less wheat is available
C. Prices will not be affected by shortages as demand is high
D. Buyer will find it difficult to negotiate lower prices

Answer: D

Explanation:
In commodity markets, shortages combined with sustained demand drive price increases. The buyer loses bargaining power, as suppliers can charge higher rates. Negotiating downward is unrealistic; instead, buyers should manage risk through hedging, forward contracts, or alternative sourcing. CIPS notes that responsible sourcing requires understanding market dynamics and their ethical implications (e.g., food security, affordability). The organisation must manage stakeholder expectations about pricing rather than assume negotiation leverage. This reflects the implications of market volatility in global supply chains.
Reference: CIPS L4M4 Study Guide (v2), LO: "Implications" - commodity market dynamics, supply
/demand, and negotiation position.

NEW QUESTION # 69
When assessing the financial performance of a potential supplier, it is important to understand how much gross profit they are making. The gross profit margin ratio uses which of the following pieces of information from the profit and loss (statement of financial performance)? Select TWO that apply.

A. Current liabilities
B. Cost of goods sold
C. Value of equity capital
D. Income from sales
E. Total current assets

Answer: B,D

Explanation:
The gross profit margin ratio is calculated by subtracting the cost of goods sold (COGS) from income from sales, then dividing by income from sales. This ratio indicates the profitability of a supplier, a critical factor in assessing financial health, which helps buyers ensure reliable supply continuity.

NEW QUESTION # 70
The procurement team received an urgent request from the business to source quotations for pestcontrol services. The team decided to use a local newspaper to advertise the requirements. Was this an appropriate approach to use in the circumstances?

A. No, because they might receive too many irrelevant proposals which may delay the assessing process
B. Yes, they must seek as many bids as possible, even if it takes longer
C. No, because international vendors must also be notified of the opportunity
D. Yes, so that the local pest control sector can decide between them who should bid

Answer: A

Explanation:
Advertising in a local newspaper for a specialized requirement can lead to irrelevant bids, delaying the process. Efficient sourcing practices recommend targeted advertising to reach qualified suppliers, ensuring timely responses and reducing assessment time, especially for urgent needs.

NEW QUESTION # 71
The use of Incoterms will eliminate all risks involved in international trade transactions. Is this statement true?

A. No, they can reduce risks but will not eliminate them
B. No, they will only provide assurance about the quality of goods
C. Yes, they eliminate all the risks of buying from an overseas supplier
D. Yes, they are popular because all risks are avoided

Answer: A

Explanation:
Incoterms clarify responsibilities between buyers and sellers, reducing certain risks but not eliminating them entirely. Responsible sourcing requires recognising that Incoterms are only part of risk management in international trade, and other factors, such as supplier reliability and quality, must be considered.

NEW QUESTION # 72
A company has a low gearing of 20%. This shows that the company relies on equity capital and should therefore have less difficulty coping during tough economic times. Is this statement TRUE?

A. Yes- a low gearing ratio means the company's finances are made up of equity rather than debt
B. Yes- a low gearing ratio shows that the business is solvent and can deal with supply chain disruptions easily
C. No- a low gearing shows you that a company isn't likely to be profitable
D. No- a low gearing suggests that the company is financed by long-term debt rather than equity

Answer: A

Explanation:
the correct answer is 'Yes- a low gearing ratio means the company's finances are made up of equity rather than debt'.
Remember low gearing = good (based on equity), high gearing = bad (based on debt). Anything over 50% is considered high.
The two no answers are therefore incorrect and you can discount these straight away. The other yes answer is one of those answers which COULD be true, but isn't always true, and we'd need more information to know for sure. When you get options like this there will be one that is always right and one which is sometimes right - so always pick the always right one.
Dealing with supply chain disruptions is complex, and depending what the disruption is, how big it is, what the industry is etc determines whether a supplier can handle it or not. Because there's more factors to consider than just gearing, this isn't the right answer.

NEW QUESTION # 73
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