PRINCE2F People: organizations, teams, and leadership Practice Question
A project is forecast to exceed its cost tolerance for the current stage. What should the Project Manager do?
⚠ Common exam trap
A common mix-up: candidates think the Project Manager can adjust the budget or delay reporting, but PRINCE2 strictly requires immediate escalation via an Exception Report when tolerances are forecast to be exceeded.
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 before proceeding
In 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 is because the Project Manager does not have authority to exceed the agreed tolerance; the Project Board must decide whether to approve a revised plan or take other corrective action. Option D correctly follows the PRINCE2 exception management process.
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 authorise spending beyond the stage cost tolerance; only the Project Board may approve additional budget via an exception plan. It is tempting because increasing budget is a legitimate Board response to an exception, but the Project Manager lacks the delegated authority to do it alone.
- ✗
Continue with the current Stage Plan and report the cost overrun in the next Highlight Report
Why it's wrong here
A forecast breach of stage cost tolerance is an exception that must be escalated to the Project Board immediately, not deferred to a Highlight Report. It is tempting because Highlight Reports do carry progress and cost data, but they are for routine reporting within tolerance, not exception escalation.
- ✗
Close the project immediately as the Business Case is no longer viable
Why it's wrong here
Tolerance breach triggers exception escalation to the Project Board, which decides whether to continue, change or stop; the Project Manager cannot unilaterally close the project. It is tempting because a failed Business Case can justify closure, but that judgement belongs to the Board on exception.
- ✓
Raise an Exception Report to the Project Board and await their direction before proceeding
Why this is correct
Forecast breach of stage cost tolerance is a PRINCE2 exception. The Project Manager escalates via an Exception Report so the Project Board can decide corrective action, since tolerances are delegated authority limits the Project Manager cannot exceed.
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