PRINCE2F Project Initiation and Stages Practice Question
You are the project manager for a software implementation project in a large retail company. The project is currently in the Initiation Stage. The senior user has provided the requirements, and the senior supplier has estimated that the project will cost £1.2 million and take 18 months. However, during a review of the Business Case, you discover that the expected benefits are only £1.3 million, giving a benefit-cost ratio of just 1.08:1. Additionally, the market conditions are volatile, and there is a risk that a competitor may launch a similar product before your project completes, potentially reducing benefits by 30%. The project board is eager to proceed but wants assurance that the project is viable. What should you do?
⚠ Common exam trap
Test-takers frequently think the board's eagerness (Option A) or escalation (Option B) is sufficient, but PRINCE2 requires the Business Case to be updated with risk-adjusted figures before any decision is made, ensuring continued business justification.
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
✓
Update the Business Case with risk-adjusted benefits and present to the board
The PRINCE2 principle of continued business justification requires that the Business Case be updated to reflect current risks and uncertainties. In this scenario, the market volatility and competitor risk could reduce benefits by 30%, dropping the expected benefits to £910,000, which is below the £1.2 million cost, making the project unviable. Presenting this risk-adjusted Business Case to the board allows them to make an informed decision on whether to proceed, rather than proceeding with an overly optimistic view.
Answer analysis
Option-by-option breakdown
For each option: why learners choose it and why it is or isn't the right answer here.
- ✗
Proceed with the current Business Case as the board is eager
Why it's wrong here
Ignoring risks is not prudent; the board needs full information.
- ✗
Escalate to the programme manager without updating the Business Case
Why it's wrong here
The PM should first assess and update the Business Case.
- ✗
Recommend cancelling the project due to poor viability
Why it's wrong here
Too premature; the risk-adjusted case may still be acceptable.
- ✓
Update the Business Case with risk-adjusted benefits and present to the board
Why this is correct
This provides a realistic assessment for decision-making.
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Same concept, more angles
2 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. During Initiation, the project manager discovers that a key assumption in the Business Case is invalid. What should the PM do first?
hard- A.Ignore the assumption
- B.Stop the project
- C.Inform the Project Board
- ✓ D.Update the Business Case
Why D: The Business Case is the key driver for the project, and if a fundamental assumption is invalid, the project manager must first update the Business Case to reflect the new reality. This ensures that the project remains viable and that the Project Board can make an informed decision about whether to continue. Updating the Business Case is the correct first step because it provides the basis for any subsequent decisions, such as escalating to the Project Board.
Variation 2. A project is initiating and the Business Case shows a cost-benefit ratio of 1:1.2. The project board is concerned. What should the project manager do?
hard- A.Reduce scope to lower costs
- B.Seek alternative options to improve benefits
- ✓ C.Provide justification and request approval
- D.Recommend project cancellation
Why C: The Business Case shows a cost-benefit ratio of 1:1.2, which is positive (benefits exceed costs). The project board's concern does not automatically invalidate the Business Case. According to PRINCE2, the project manager's role during initiation is to provide the board with the justification (the Business Case) and formally request approval to proceed. Option C is correct because the project manager must present the evidence and seek a decision, not unilaterally change scope or cancel.
JA
Written by Johnson Ajibi, MSc IT Security
Senior Network & Security Engineer · founder of Courseiva
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.