The answer is to raise an Exception Report to the Project Board and await their direction. This is correct because in PRINCE2, the Project Manager operates within defined tolerances set by the Project Board; when a forecast shows that cost tolerance will be exceeded, the manager has no authority to adjust the budget or tolerance levels themselves. Instead, they must escalate the issue formally through an Exception Report, which triggers the Project Board to assess the situation and decide on corrective actions, such as revising the plan or stopping the project. On the PRINCE2 Foundation exam, this question tests your understanding of the management by exception principle and the escalation process when cost tolerance is exceeded—a common trap is assuming the Project Manager can simply request more budget or adjust the plan independently. A useful memory tip is to think of the Exception Report as a "red flag" that forces the Board to steer the project, not the manager.
PRINCE2F People: organizations, teams, and leadership Practice Question
This PRINCE2F practice question tests your understanding of people: organizations, teams, and leadership. The scenario asks you to isolate a root cause — eliminate options that address a different problem before choosing. After answering, compare your reasoning against the explanation and wrong-answer breakdown below. Once you have made your selection, read the full explanation to reinforce the concept and understand why each distractor is designed to mislead on exam day.
A project is forecast to exceed its cost tolerance. What should the Project Manager do?
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 forecasts exceeding its cost tolerance, the Project Manager must escalate the issue to the Project Board via an Exception Report. This is a formal mechanism to request a decision on corrective action, as the Project Manager does not have authority to change tolerances or budgets. The Project Board then evaluates the situation and provides direction, ensuring governance and control over the project's viability.
Key principle: Answer the scenario, not the keyword: identify the specific constraint before choosing the most familiar-sounding option.
Answer analysis
Option-by-option breakdown
For each option: why learners choose it and why it is or isn't the right answer here.
✓
Raise an Exception Report to the Project Board and await their direction
Why this is correct
This is the correct escalation procedure per PRINCE2's management by exception principle.
Related concept
Read the scenario before looking for a memorised answer.
✗
Increase the project budget and continue with the current plan
Why it's wrong here
The Project Manager cannot unilaterally increase the budget; that requires Project Board approval.
✗
Continue with the current plan and report the overrun in the next Highlight Report
Why it's wrong here
Continuing without escalation violates management by exception.
✗
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 Board must decide.
Common exam traps
Common exam trap: answer the scenario, not the keyword
PeopleCert often tests the misconception that the Project Manager can adjust budgets or plans within their own authority, but PRINCE2 strictly requires escalation to the Project Board when tolerances are forecast to be exceeded, not after the fact or via routine reports.
Detailed technical explanation
How to think about this question
The Exception Report is a key PRINCE2 management product defined in the 'Progress' theme, triggered when a forecast indicates a deviation beyond agreed tolerances. The Project Manager must include the cause, options, and recommended actions in the report. In practice, this ensures that the Project Board retains control over significant changes, preventing unauthorized scope creep or budget overruns, and aligns with the 'manage by exception' principle where day-to-day decisions are delegated but exceptions require board-level approval.
KKey Concepts to Remember
Read the scenario before looking for a memorised answer.
Find the constraint that changes the correct option.
Eliminate answers that are true in general but not in this case.
TExam Day Tips
→Watch for words such as best, first, most likely and least administrative effort.
→Review why wrong options are wrong, not only why the correct option is correct.
Key takeaway
Answer the scenario, not the keyword: identify the specific constraint before choosing the most familiar-sounding option.
Real-world example
How this comes up in practice
A practitioner preparing for the PRINCE2F exam encounters this exact type of scenario on the job. The correct answer here is not the most general option — it is the best answer for the specific constraint described. Answer the scenario, not the keyword: identify the specific constraint before choosing the most familiar-sounding option. Real exam questions reward reading the full scenario before eliminating options, because the constraint defines which answer fits.
What to study next
Got this wrong? Here's your next step.
Identify which exam domain this question belongs to, review the core concept, then practise similar questions from the same domain.
People: organizations, teams, and leadership — This question tests People: organizations, teams, and leadership — Read the scenario before looking for a memorised answer..
What is the correct answer to this question?
The correct answer is: Raise an Exception Report to the Project Board and await their direction — In PRINCE2, when a project forecasts exceeding its cost tolerance, the Project Manager must escalate the issue to the Project Board via an Exception Report. This is a formal mechanism to request a decision on corrective action, as the Project Manager does not have authority to change tolerances or budgets. The Project Board then evaluates the situation and provides direction, ensuring governance and control over the project's viability.
What should I do if I get this PRINCE2F question wrong?
Identify which exam domain this question belongs to, review the core concept, then practise similar questions from the same domain.
What is the key concept behind this question?
Read the scenario before looking for a memorised answer.
About these practice questions
Courseiva creates original exam-style practice questions with explanations and wrong-answer analysis. It does not publish real exam questions, exam dumps, or protected exam content. Learn why practice questions differ from exam dumps →
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. A project is forecast to exceed its cost tolerance. What should the Project Manager do?
hard
A.Continue and report the overrun in the next Highlight Report
B.Increase the budget and continue with the current plan
C.Close the project as the Business Case is no longer viable
✓ D.Raise an Exception Report to the Project Board
Why D: When a tolerance is forecast to be exceeded, the Project Manager must escalate to the Project Board via an Exception Report. This is the principle of management by exception.
Variation 2. A project is forecast to exceed its cost tolerance. What should the Project Manager do?
medium
A.Close the project immediately
✓ B.Raise an Exception Report to the Project Board
C.Increase the budget and continue with the current plan
D.Report the overrun in the next Highlight Report
Why B: When a tolerance is forecast to be exceeded, the Project Manager must escalate to the Project Board via an Exception Report. This is management by exception.
Variation 3. A project is forecast to exceed its cost tolerance. What should the Project Manager do?
medium
A.Close the project immediately as the Business Case is no longer viable
B.Continue and report the cost overrun in the next Highlight Report
✓ C.Raise an Exception Report to the Project Board and await their direction
D.Increase the project budget to absorb the additional cost
Why C: In PRINCE2, when a project is forecast to exceed its cost tolerance, the Project Manager must escalate the issue to the Project Board via an Exception Report. This is because the Project Manager does not have authority to exceed tolerances; the Project Board must decide whether to approve a revised Business Case, adjust tolerances, or terminate the project. Option C correctly follows the PRINCE2 principle of management by exception.
Variation 4. A project is forecast to exceed its stage cost tolerance. What should the Project Manager do?
medium
A.Continue and report in the next Highlight Report
B.Close the project as the Business Case is no longer viable
✓ C.Raise an Exception Report to the Project Board
D.Increase the stage budget to absorb the overrun
Why C: When a tolerance is forecast to be exceeded, the Project Manager must escalate to the Project Board via an Exception Report immediately.
Variation 5. A project is forecast to exceed its stage cost tolerance. What should the Project Manager do?
medium
A.Report the overrun in the next Highlight Report
✓ B.Raise an Exception Report to the Project Board
C.Close the project as the Business Case is no longer viable
D.Increase the stage budget and continue
Why B: In PRINCE2, when a project manager forecasts that a stage will exceed its cost tolerance, they must escalate the issue to the Project Board by raising an Exception Report. This is because tolerances are delegated limits, and exceeding them requires board-level decision-making, not just reporting or self-authorization. The Exception Report triggers an Exception Plan to recover or adjust the project.
Variation 6. A project is forecast to exceed its stage cost tolerance. What should the Project Manager do?
medium
A.Increase the stage budget using contingency reserves
✓ B.Raise an Exception Report to the Project Board
C.Close the project as the Business Case is no longer viable
D.Continue with the current plan and report the overrun in the next Highlight Report
Why B: According to PRINCE2's management by exception, if a tolerance is forecast to be exceeded, the Project Manager must escalate to the Project Board via an Exception Report.
Variation 7. A project is forecast to exceed its stage cost tolerance. What should the Project Manager do?
medium
A.Increase the project budget to absorb the additional cost
B.Continue and report in the next Highlight Report
✓ C.Raise an Exception Report to the Project Board
D.Close the project immediately
Why C: When a tolerance is forecast to be exceeded, the Project Manager must escalate to the Project Board via an Exception Report, following management by exception.
Variation 8. A project is forecast to exceed its stage cost tolerance. What should the Project Manager do?
medium
✓ A.Raise an Exception Report to the Project Board
B.Increase the budget and continue
C.Close the project immediately
D.Continue and report in the next Highlight Report
Why A: Escalation via Exception Report is required when a tolerance is forecast to be exceeded.
Last reviewed: Jun 30, 2026
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