PRINCE2F PRINCE2 Practices Practice Question
A project is forecast to exceed its cost tolerance. What should the Project Manager do?
⚠ Common exam trap
A common mix-up: candidates think a Highlight Report is sufficient for reporting issues, but PRINCE2 requires an Exception Report specifically when a tolerance is forecast to be exceeded, not just a routine report.
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
In PRINCE2, when a project 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 tolerances are delegated limits, and exceeding them requires a decision from the Project Board to either approve a deviation, change the plan, or take 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.
- ✗
Close the project immediately as the Business Case is no longer viable
Why it's wrong here
Exceeding cost tolerance does not automatically invalidate the Business Case; the Project Manager must first assess whether the forecast overrun can be resolved through an exception plan or revised tolerances. Closing the project immediately bypasses the PRINCE2 requirement to escalate the deviation to the Project Board for a decision. This option is tempting because a cost overrun can indeed threaten viability, and immediate closure would be correct only if the Business Case had already been formally assessed and found no longer justified.
- ✗
Continue with the current plan and report the cost overrun in the next Highlight Report
Why it's wrong here
Continuing without escalation when a tolerance is forecast to be exceeded violates management by exception.
- ✓
Raise an Exception Report to the Project Board and await their direction
Why this is correct
When a stage tolerance is forecast to be exceeded, the Project Manager must escalate immediately via an Exception Report.
- ✗
Increase the budget to absorb the additional cost and continue with the current plan
Why it's wrong here
Unilaterally increasing the budget exceeds the Project Manager’s delegated authority under PRINCE2’s delegated tolerances; the correct action is to raise an exception report to the Project Board for a decision. This option is tempting because in operational contexts a manager can often reallocate funds within a cost centre, but PRINCE2 requires escalation when a forecast breach of tolerance is identified, not unilateral replanning.
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