PRINCE2F Business Case and Organizing Practice Question
You are the project manager of a PRINCE2 project to implement a new customer relationship management system. The project board has just approved the project initiation documentation. During the first delivery stage, the supplier informs you that a key software component will cost 30% more than planned. This increases the total project cost beyond the approved budget by 15%. According to PRINCE2, what should you do FIRST?
⚠ Common exam trap
The trap here is assuming that updating the business case or logging a risk is sufficient, when actually a breach of tolerance requires immediate escalation to the project board.
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 because the stage-level tolerance for cost has been exceeded.
In PRINCE2, the project manager has authority to manage within agreed tolerances. When a forecast shows that a tolerance (e.g., cost) will be exceeded, the project manager must escalate by raising an exception report to the project board. The board, which owns the business case, then decides whether to approve an exception plan, change the project, or stop it. This maintains the principle of manage 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.
- ✗
Log the increased cost as a risk in the risk register and monitor it at the next stage boundary.
Why it's wrong here
Logging a risk is appropriate for uncertain future events, but here the cost increase is a certainty that has already occurred. It is an issue, not a risk. The project manager should record it in the issue register and, because it breaches tolerance, escalate via an exception report. Monitoring passively would delay necessary decisions and could jeopardize the business case.
- ✗
Instruct the supplier to find cost savings elsewhere to keep the project within budget.
Why it's wrong here
While cost savings may be desirable, this is not the first action. The project manager cannot unilaterally direct the supplier to absorb costs or find savings without understanding the impact on scope, quality, and benefits. The correct first step is to escalate the forecast overrun to the project board, who may then direct such actions as part of an exception plan.
- ✓
Raise an exception report to the project board because the stage-level tolerance for cost has been exceeded.
Why this is correct
In PRINCE2, the project manager manages by exception. If a stage or project tolerance is forecast to be exceeded, an exception report must be raised to the project board. The board then decides how to proceed. This ensures the business case remains viable and that the board can authorize a new plan or stop the project if justification is lost.
- ✗
Update the business case to reflect the increased costs and continue with the project as planned.
Why it's wrong here
Updating the business case is necessary but not the first action. The business case is a living document, but a 15% budget overrun is a significant deviation that may invalidate the justification. You must escalate to the project board, as they own the business case and decide whether to continue, change, or stop the project. Continuing without approval would bypass tolerances.
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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.