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Principle of Manage by Exception

How tolerances work in the PRINCE2 governance hierarchy:

Principle: Manage by Exception (Tolerances) Question 1 of 1

During a delivery stage of a PRINCE2 project, the Project Manager forecasts that stage final cost will exceed the cost tolerance agreed with the Project Board. What is the MANDATORY procedure?

Silently cut back deliverable quality or scope to keep within budget.

Log the issue in the Issue Register and immediately submit an Exception Report to the Project Board.

Immediately shut down the project and dismiss the delivery teams.

Reallocate contingency budget from future project stages without notifying the Board.

✓ PRINCE2 Official Rationale: Option B is correct. The Manage by Exception principle states that Project Managers are delegated authority within 6 set tolerances (Time, Cost, Quality, Scope, Benefits, and Risk). As soon as an agreed tolerance is forecast to be breached, an Exception Report must be raised to the Project Board for directional decision.

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