PRINCE2F Practice Question: Overview of PRINCE2 and the project environment
A project is forecast to exceed its cost tolerance. What should the Project Manager do first?
⚠ Common exam trap
PRINCE2F often tests the boundary between Project Manager and Project Board authority — candidates incorrectly pick 'approve additional budget' or 'update the Business Case' because those seem like logical next steps, but both are Board-level decisions, not PM actions.
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
✓
Issue an Exception Report to the Project Board
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.
Answer analysis
Option-by-option breakdown
For each option: why learners choose it and why it is or isn't the right answer here.
- ✓
Issue an Exception Report to the Project Board
Why this is correct
Forecast breach of a cost tolerance is an exception, so the Project Manager escalates by issuing an Exception Report to the Project Board, which decides how to respond. This satisfies the stem's first action, since tolerances cannot be exceeded without Board authorisation.
- ✗
Update the Business Case to reflect the new cost
Why it's wrong here
Updating the Business Case is not the first action; the Project Manager must first raise an exception and escalate to the Project Board, since cost tolerance breach exceeds delegated authority. Updating the Business Case is correct only after the Board approves a new plan, not before escalation.
- ✗
Close the project as it is no longer viable
Why it's wrong here
Closing the project is a Project Board decision, not the Project Manager's first action. The Manager must raise an exception report to the Board, which then decides whether to continue, change or stop. Closing would be correct only if the Board, after reviewing the exception, judged the project no longer viable.
- ✗
Approve additional budget using contingency
Why it's wrong here
A Project Manager cannot authorise spend beyond the cost tolerance; that decision belongs to the Project Board, which may release contingency or escalate. Approving contingency is tempting because contingency exists precisely to absorb forecast overspend, but only the Board controls its release once tolerance is breached.
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JA
Written and reviewed by Johnson Ajibi, MSc IT Security
Senior Network & Security Engineer · founder of Courseiva
Last reviewed September 2026 · checked against the official PeopleCert exam blueprint
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.