PRINCE2F PRINCE2 Practices Practice Question
During the Controlling a Stage process, the Project Manager identifies that the project is forecast to exceed the agreed cost tolerance for the current stage. What should the Project Manager do?
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
When a tolerance is forecast to be exceeded, the Project Manager must escalate to the Project Board via an Exception Report — this is PRINCE2's management by exception principle. The Project Manager cannot unilaterally decide to exceed tolerances; that requires Project Board authorisation. Option A is wrong because the PM cannot increase the budget without Project Board approval. Option B is wrong because closing the project is not the appropriate response to a stage tolerance breach; the Project Board may decide to close if the Business Case is no longer viable. Option C is wrong because continuing without escalation violates management by exception.
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 project budget. Changes to project-level tolerances require Project Board authorisation.
- ✗
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 must assess the situation and decide whether to continue, change direction, or close.
- ✗
Continue with the current Stage 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 PRINCE2's management by exception principle.
- ✓
Raise an Exception Report to the Project Board and await their direction before proceeding
Why this is correct
When a stage tolerance is forecast to be exceeded, the Project Manager must escalate to the Project Board immediately via an Exception Report. This is management by exception.
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