PMP Practice Question: Business Environment: strategy and project benefits
Your project is using a hybrid approach. The business case is no longer valid due to a change in market conditions, but the sponsor insists on continuing because significant resources have already been spent. What is the best action?
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
✓
Present the updated business case and recommend a formal decision review with the steering committee
The project manager should present the updated business case and recommend a formal review to decide whether to continue or terminate. Sunk costs should not drive decisions.
Answer analysis
Option-by-option breakdown
For each option: why learners choose it and why it is or isn't the right answer here.
- ✓
Present the updated business case and recommend a formal decision review with the steering committee
Why this is correct
As a Project Manager, your primary responsibility is to provide objective, data-driven information to project governance bodies, such as the steering committee, when a project's viability changes. Presenting an updated business case, reflecting current conditions, enables informed strategic decisions regarding project continuation, modification, or termination. Recommending a formal decision review ensures adherence to organizational governance frameworks and stakeholder alignment, preventing unilateral actions and promoting accountability. This approach empowers the appropriate authority to make a strategic choice based on the latest financial and market realities.
- ✗
Increase the project budget to improve the business case
Why it's wrong here
Increasing the project budget is an internal project adjustment that does not inherently improve the fundamental viability or attractiveness of the business case, especially when external market conditions or strategic alignment have deteriorated. A business case is evaluated on its expected return on investment and strategic value, which are not automatically enhanced by simply allocating more funds. Such an action would likely exacerbate financial losses if the underlying market demand or strategic rationale remains weak, making the project even less justifiable.
- ✗
Stop the project immediately to prevent further losses
Why it's wrong here
While preventing further losses is a valid concern, stopping a project immediately without a formal review process and stakeholder consultation is a premature and potentially disruptive action. Such a unilateral decision bypasses established governance structures and can lead to significant organizational backlash, loss of trust, and unmanaged termination costs. A formal review allows for a comprehensive assessment of all options, including potential pivots or phased termination, ensuring an orderly and strategically aligned project closure or redirection.
- ✗
Continue the project as planned to avoid wasting invested resources
Why it's wrong here
Continuing a project solely to avoid wasting previously invested resources, known as the sunk cost fallacy, is an irrational decision-making trap. Project decisions should always be based on the project's future viability, expected benefits, and strategic alignment, not on unrecoverable past expenditures. Persisting with a project that no longer has a strong business case will only lead to greater future losses and misallocation of valuable organizational resources that could be better utilized elsewhere.
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Variation 1. A project manager is leading a project that is aligned with the organization's strategic goal to increase market share. However, during execution, a competitor releases a similar product, reducing the expected benefits. What should the project manager do?
hard- A.Immediately stop the project to avoid further losses.
- B.Continue the project as planned because the strategic goal has not changed.
- ✓ C.Update the business case and present the revised benefits to the steering committee for a go/no-go decision.
- D.Add more features to differentiate the product from the competitor's.
Why C: The project manager must reassess the business case when external market changes (like a competitor's product launch) reduce expected benefits. Updating the business case with revised benefits and presenting it to the steering committee ensures an informed go/no-go decision based on current strategic alignment and value, as per PMBOK Guide's business case management and benefits realization processes.
JA
Written by Johnson Ajibi, MSc IT Security
Senior Network & Security Engineer · founder of Courseiva
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