PRINCE2F PRINCE2 Practices Practice Question
A project is forecast to exceed its cost tolerance for the current stage. According to PRINCE2, what should the Project Manager do?
⚠ Common exam trap
Many exam-takers assume cost overruns can be handled within the Project Manager's authority or that the Business Case is automatically invalid, when PRINCE2 mandates escalation to the Project Board for any forecast tolerance breach.
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 and await their direction
According to PRINCE2, when a stage is forecast to exceed its cost tolerance, the Project Manager must escalate the issue to the Project Board by raising an Exception Report. This triggers a formal decision process where the Board can authorize a revised Stage Plan or take other corrective action. Continuing without escalation violates the management by exception principle.
Answer analysis
Option-by-option breakdown
For each option: why learners choose it and why it is or isn't the right answer here.
- ✗
Increase the project budget to absorb the additional cost and continue with the current Stage Plan
Why it's wrong here
The Project Manager cannot unilaterally increase the budget; this requires Project Board approval.
- ✓
Raise an Exception Report to the Project Board and await their direction
Why this is correct
When a stage’s cost tolerance is forecast to be exceeded, the Project Manager must escalate because the deviation is beyond the delegated authority. PRINCE2 requires an Exception Report to the Project Board, who then decide on corrective action. This mechanism satisfies the *management by exception* principle, which limits the Project Manager’s authority to within the agreed tolerance for the current stage.
- ✗
Close the project immediately as the Business Case is no longer viable
Why it's wrong here
A cost tolerance breach does not automatically mean the Business Case is unviable; the Project Board decides.
- ✗
Continue with the current Stage Plan and report the cost overrun in the next Highlight Report
Why it's wrong here
Continuing without escalation violates management by exception; the PM must escalate immediately.
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Written by Johnson Ajibi, MSc IT Security
Senior Network & Security Engineer · founder of Courseiva
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