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
PRINCE2 does not assume a programme; escalation is to the Project Board.
- ✗
Revise the Project Plan and continue
Why it's wrong here
The Project Manager cannot revise the project-level budget without Board approval.
- ✓
Raise an Exception Report to the Project Board
Why this is correct
This is the correct action per PRINCE2's management by exception.
- ✗
Close the project
Why it's wrong here
The Project Board may decide to close, but the PM does not do so unilaterally.
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Related to this question
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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: When a tolerance is forecast to be exceeded, the Project Manager must escalate to the Project Board via an Exception Report — this is PRINCE2's management by exception principle. The Project Manager cannot unilaterally decide to exceed tolerances; that requires Project Board authorisation. Option A is wrong because closing the project immediately is not the appropriate first response. Option B is wrong because continuing without escalation violates management by exception. Option D is wrong because the Project Manager cannot increase the budget without Project Board approval.
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: According to the management by exception principle, exceeding tolerance must be escalated to the Project Board via an Exception Report.
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: According to PRINCE2's management by exception, when a tolerance is forecast to be exceeded, the Project Manager must escalate to the Project Board via an Exception Report.
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.