- A
Raise an Exception Report to the Project Board
Correct action under management by exception.
- B
Continue with the current plan and report the overrun in the next Highlight Report
Why wrong: This violates management by exception; escalation is required immediately.
- C
Close the project immediately
Why wrong: The Business Case may still be viable; the Project Board decides.
- D
Increase the project budget to absorb the additional cost
Why wrong: The Project Manager cannot unilaterally increase the budget.
Question 1,635 of 1,731
PRINCE2 Cost Tolerance Breach: Escalate via Exception Report
This PRINCE2F practice question tests your understanding of prince2 practices. 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 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
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 because tolerances are delegated authority limits, and exceeding them requires a formal exception plan for approval. The Project Manager cannot unilaterally continue, close, or increase the budget, as these actions violate the management by exception principle.
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
Why this is correct
Correct action under management by exception.
Related concept
Read the scenario before looking for a memorised answer.
- ✗
Continue with the current plan and report the overrun in the next Highlight Report
Why it's wrong here
This violates management by exception; escalation is required immediately.
- ✗
Close the project immediately
Why it's wrong here
The Business Case may still be viable; the Project Board decides.
- ✗
Increase the project budget to absorb the additional cost
Why it's wrong here
The Project Manager cannot unilaterally increase the budget.
Common exam traps
Common exam trap: answer the scenario, not the keyword
The trap here is that candidates confuse Highlight Reports (for within-tolerance status updates) with Exception Reports (for tolerance breaches), leading them to choose Option B instead of escalating immediately.
Detailed technical explanation
How to think about this question
Under the hood, PRINCE2's tolerance mechanism uses stage-level and project-level tolerances defined in the Business Case and Stage Plans. When a forecast breach occurs, the Project Manager must produce an Exception Report detailing the cause, impact, and options, which triggers the Project Board to either approve an exception plan (revised tolerances) or take corrective action. In real-world scenarios, ignoring tolerance breaches can lead to uncontrolled cost overruns and loss of governance, making the Exception Report a critical control point.
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.
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FAQ
Questions learners often ask
What does this PRINCE2F question test?
PRINCE2 Practices — This question tests PRINCE2 Practices — 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 — 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 because tolerances are delegated authority limits, and exceeding them requires a formal exception plan for approval. The Project Manager cannot unilaterally continue, close, or increase the budget, as these actions violate the management by exception principle.
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 →
Same concept, more angles
8 more ways this is tested on PRINCE2F
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?
medium- A.Close the project immediately
- B.Increase the project budget and continue
- ✓ C.Raise an Exception Report to the Project Board
- D.Continue and report in the next Highlight Report
Why C: When a tolerance is forecast to be exceeded, the Project Manager must escalate to the Project Board via an Exception Report.
Variation 2. A project is forecast to exceed its cost tolerance. What should the Project Manager do?
hard- A.Continue and report in the next Highlight Report
- B.Increase the project budget and continue
- C.Close the project immediately
- ✓ D.Raise an Exception Report to the Project Board
Why D: Management by exception requires escalation via an Exception Report to the Project Board when a tolerance is forecast to be exceeded.
Variation 3. A project is forecast to exceed its cost tolerance. What should the Project Manager do?
medium- ✓ A.Raise an Exception Report to the Project Board
- B.Close the project immediately
- C.Continue with the current plan and report at the next Highlight Report
- D.Increase the budget and inform the Project Board
Why A: When a tolerance is forecast to be exceeded, the PM must escalate via an Exception Report to the Project Board. This is management by exception.
Variation 4. A project is forecast to exceed its cost tolerance. What should the Project Manager do?
medium- A.Continue with the current Stage Plan and report in the next Highlight Report
- ✓ B.Raise an Exception Report to the Project Board
- C.Increase the project budget to absorb the additional cost
- D.Close the project immediately
Why B: When a tolerance is forecast to be exceeded, the Project Manager must escalate to the Project Board via an Exception Report.
Variation 5. A project is forecast to exceed its cost tolerance. What should the Project Manager do?
medium- A.Continue with the current Stage Plan and report the cost overrun in the next Highlight Report
- ✓ B.Raise an Exception Report to the Project Board and await their direction before proceeding
- C.Close the project immediately as the Business Case is no longer viable
- D.Increase the project budget to absorb the additional cost and continue with the current Stage Plan
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 PRINCE2's management by exception principle.
Variation 6. A project is forecast to exceed its cost tolerance. What should the Project Manager do first?
medium- A.Close the project immediately
- ✓ B.Issue an Exception Report to the Project Board
- C.Increase the budget to cover the extra cost
- D.Continue with the current plan and report at the end of the stage
Why B: According to the management by exception principle, when 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 cost tolerance. What should the Project Manager do first?
medium- A.Ask the Project Board for more tolerance
- B.Close the project
- C.Continue with the current plan and report in the next Highlight Report
- ✓ D.Raise an Exception Report to the Project Board
Why D: D is correct because PRINCE2 requires the Project Manager to escalate any forecast deviation beyond tolerance to the Project Board via an Exception Report. This triggers a formal decision process, ensuring the board can authorize corrective action before the situation worsens.
Variation 8. A project is forecast to exceed its cost tolerance. What should the Project Manager do?
medium- A.Close the project as the Business Case is no longer viable.
- B.Increase the project budget using the change budget.
- ✓ C.Raise an Exception Report and await Project Board direction.
- D.Continue with the plan and report the overrun in the next Highlight Report.
Why C: C is correct because 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 PRINCE2 management by exception principle: tolerances are delegated limits, and exceeding them requires board-level decision-making, not unilateral action by the Project Manager.
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Last reviewed: Jul 4, 2026
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