CIPS Exam L4M4 Topic 3 Question 7 Discussion

Actual exam question for CIPS's L4M4 exam

Question #: 7
Topic #: 3

[All L4M4 Questions]

Philip is a procurement manager at XYZ Company which imports raw materials from abroad. Sup-pliers provide quotes to Philip in their local currency. Is this the best way to reduce the risk to XYZ Company of currency fluctuations?

Ayes- this means the price won't go up or down

Byes- this puts the risk on the supplier

Cno- quoting in the supplier's currency increases the risk for the buyer

Dno- quoting in the supplier's currency does not affect the risk to the buying organisation

Show Suggested Answer

Suggested Answer: C

The correct answer is 'no- quoting in the supplier's currency increases the risk for the buyer'. This questions comes up in a variety of formats in the exam. Remember; if the price is in your own currency (most examples in the exam are given in ) there is less risk than if the prices are quoted in a foreign currency. This is because exchange rates fluctuate; if the price is in you always know what you're paying, if it's in another currency the price can change daily depending on if the exchange rate compared to has gone up or down.

by Glendora at Apr 12, 2024, 09:33 PM

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Colton

8 months ago

Yes, it's the best way to reduce the risk for XYZ Company.

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Stefania

8 months ago

So, should Philip continue to ask for quotes in the supplier's local currency?

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Frederick

8 months ago

I believe quoting in the supplier's currency does not affect the risk to the buying organization.

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Estrella

8 months ago

That's true, but it puts all the risk on the supplier.

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Yesenia

8 months ago

But doesn't it also mean the price won't go up or down, decreasing uncertainty?

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Martha

8 months ago

I think quoting in the supplier's currency increases risk for XYZ Company.

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Benedict

9 months ago

I see your point, Putting the risk on the supplier could protect XYZ Company from currency fluctuations.

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Lindsey

9 months ago

But wouldn't shifting the risk to the supplier be better? That's what option B suggests.

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Billye

10 months ago

I agree with it makes sense that the risk would be higher if the quote is in the supplier's currency.

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Peggie

10 months ago

I think quoting in the supplier's currency increases the risk for the buyer.

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Raymon

11 months ago

Whoa, hold on a minute. Didn't we just establish that quoting in the supplier's currency could increase the risk? I'm pretty sure option C is the correct answer here.

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Kirk

11 months ago

You know, I'm starting to think option D might be the way to go. If quoting in the supplier's currency doesn't affect the risk, then that might be the simplest and most straightforward approach.

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Kathrine

9 months ago

Actually, option C makes sense. It's better to avoid currency fluctuations.

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Jerlene

10 months ago

But won't quoting in the supplier's currency increase the risk for the buyer?

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Lenna

10 months ago

I think option D is a safe choice.

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Richelle

11 months ago

Hold up, are we sure option A is right? I mean, just because the price won't go up or down doesn't mean the risk is eliminated. Currency fluctuations could still have a big impact on the bottom line.

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Zachary

11 months ago

Hmm, I'm not so sure. Couldn't quoting in the supplier's currency help the buying organization hedge against currency fluctuations? That's what option A seems to be implying.

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Daniel

11 months ago

I agree, it's not as straightforward as it seems. Quoting in the supplier's currency could actually increase the risk for the buying organization, as option C suggests.

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Lawrence

11 months ago

I think this is a tricky question. On the surface, option B seems like the best choice since it puts the risk on the supplier. But I'm not sure that's the full story here.

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