PRINCE2F Practice Question: Overview of PRINCE2 and the project environment
A project is forecast to exceed its cost tolerance at the project level. What should the Project Manager do first?
⚠ Common exam trap
Many exam-takers confuse escalation to the Programme Manager (Option A) with the correct escalation to the Project Board, or mistakenly believe the Project Manager can autonomously revise the plan (Option B) when the forecast breach requires Board-level decision-making.
Answer choices
Why each option matters
Answer the question above first, then reveal the full breakdown to understand why each option is right or wrong.
Correct answer & explanation
✓
Raise an Exception Report to the Project Board
When a project is forecast to exceed its cost tolerance at the project level, the Project Manager must first escalate the deviation to the Project Board by raising an Exception Report. This is because the Project Board holds the authority to approve changes to tolerances or authorize corrective actions, and the Project Manager cannot unilaterally revise the plan or close the project. The Exception Report provides the Board with the necessary information to make an informed decision on how to proceed.
Answer analysis
Option-by-option breakdown
For each option: why learners choose it and why it is or isn't the right answer here.
- ✗
Escalate to the Programme Manager
Why it's wrong here
Escalation goes to the Project Board, which owns project-level tolerance; the Programme Manager is not the PRINCE2 escalation route unless also acting in a board role. Escalating is tempting because breaching tolerance demands upward referral, but the correct recipient is the Board via an Exception Report.
- ✗
Revise the Project Plan and continue
Why it's wrong here
Revising the Project Plan and continuing bypasses the tolerance breach, which requires an Exception Report to the Project Board for a decision. Producing exception plans is legitimate once the Board requests one, but the Project Manager cannot unilaterally re-baseline a plan exceeding project-level cost tolerance.
- ✓
Raise an Exception Report to the Project Board
Why this is correct
Breaching project-level cost tolerance exceeds the Project Manager's delegated authority, so an Exception Report must be escalated to the Project Board, which decides whether to stop, redirect or continue. The Project Manager cannot unilaterally revise the project-level budget.
- ✗
Close the project
Why it's wrong here
Closing the project is premature; a forecast tolerance breach triggers exception management, not termination. Premature closure is tempting when the business case appears unviable, but that judgement belongs to the Project Board, which may instead request an exception plan or amend the project.
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Same concept, more angles
6 more ways this is tested on PRINCE2F
These questions test the same concept from different angles. Work through them to make sure you can recognise it however the exam phrases it.
Variation 1. During the Controlling a Stage process, the Project Manager identifies that the project is forecast to exceed the agreed cost tolerance for the current stage. What should the Project Manager do?
medium- A.Close the project immediately as the Business Case is no longer viable
- B.Continue with the current Stage Plan and report the cost overrun in the next Highlight Report
- ✓ C.Raise an Exception Report to the Project Board and await their direction before proceeding
- D.Increase the project budget to absorb the additional cost and continue with the current Stage Plan
Why C: In PRINCE2, when a forecast indicates that a stage-level tolerance (such as cost) will be exceeded, the Project Manager must escalate the issue to the Project Board by raising an Exception Report. This is because tolerances are delegated limits of authority; exceeding them means the Project Manager no longer has the authority to proceed without Board approval. The Exception Report presents the situation, options, and a recommendation, allowing the Board to decide whether to stop, change, or continue the project. Option C correctly reflects this mandatory escalation procedure.
Variation 2. A project is forecast to exceed its cost tolerance. What should the Project Manager do?
medium- A.Close the project
- B.Continue and report later
- ✓ C.Raise an Exception Report
- D.Increase the project budget
Why C: The PM must escalate via an Exception Report to the Project Board.
Variation 3. A project is forecast to exceed its cost tolerance. What should the Project Manager do?
medium- A.Report in the next Highlight Report
- B.Increase the project budget
- ✓ C.Raise an Exception Report
- D.Close the project
Variation 4. A project is forecast to exceed its cost tolerance. What should the Project Manager do?
medium- A.Continue and report in the next Highlight Report
- ✓ B.Raise an Exception Report to the Project Board
- C.Increase the budget to cover the overrun
- D.Close the project immediately
Why B: In PRINCE2, tolerances are the permissible deviation from the plan before escalation is required. When a forecast shows that cost tolerance will be exceeded, the Project Manager must raise an Exception Report to the Project Board, because the Board owns the stage and project tolerances and is the only body authorised to grant a tolerance or approve a new plan. The Exception Report describes the deviation, its cause, impact, and options, allowing the Board to decide how to proceed.
Variation 5. A project is forecast to exceed its cost tolerance. What should the Project Manager do first?
medium- ✓ A.Issue an Exception Report to the Project Board
- B.Update the Business Case to reflect the new cost
- C.Close the project as it is no longer viable
- D.Approve additional budget using contingency
Why A: In PRINCE2, when a project is forecast to exceed a tolerance (in this case cost tolerance), the Project Manager must escalate the deviation to the Project Board by producing an Exception Report. The Project Board then decides whether to approve a change, request more information, or take corrective action. This is the defined 'manage by exception' principle — the Project Manager does not unilaterally approve additional budget or change the Business Case.
Variation 6. A project is forecast to exceed its stage cost tolerance. What should the Project Manager do?
hard- A.Continue and report in the next Highlight Report
- ✓ B.Raise an Exception Report to the Project Board
- C.Close the project
- D.Increase the stage budget and continue
Why B: When a tolerance is forecast to be exceeded, the Project Manager must escalate to the Project Board via an Exception Report.
JA
Written by Johnson Ajibi, MSc IT Security
Senior Network & Security Engineer · founder of Courseiva
This PRINCE2F practice question is part of Courseiva's free PeopleCert certification practice question bank. Courseiva provides original exam-style practice questions with explanations, topic-based practice, mock exams, readiness tracking, and study analytics to help learners prepare for the PRINCE2F exam.