CIPS L4m4 Ethical And Responsible Sourcing · Free Practice Question Medium
Question 6
Khalid is a procurement manager in the UK who is looking to source exotic fruit for a retailer. As this type of fruit doesn't grow naturally in the UK Khalid is looking at international suppliers, but is worried about variations in exchange rates. He is considering asking the suppliers to provide quotes in their local currencies. Will this reduce the risk posed to Khalid?
- A yes- suppliers should quote in their own currencies so there is no risk to the importing company
- B yes- when suppliers quote in local currencies you are more likely to get better prices
- C no- quoting the prices in GBP / £ will provide Khalid with better security against currency fluctuations
- D no- prices should be quoted in GBP / £ as this will reduce the cost of imports
Reveal correct answer
Correct answer: C
Explanation
The answer to the question is no. So you can immediately discount the options starting with yes.
Quoting in GBP / £ rather than the supplier's currency reduces the risk to the buyer. It will not reduce the cost of the import, and will probably increase it as the supplier is then taking on the risk of currency fluctuations.
p.147-148
Discussion
Think the marked answer is wrong, or have a better explanation? Share it below — comments appear after review.
