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CAPM · Question #293

A project team is working on relocating offices to another building and providing new furniture. The new furniture was purchased from an international vendor. The price was negotiated in a foreign cur

The correct answer is B. Escalate this issue to the project sponsor.. A 10% cost increase due to currency exchange rate with no contingency budget is a significant financial issue that exceeds the PM's authority to resolve alone, requiring escalation to the project sponsor who holds budget accountability. The sponsor is the appropriate first escala

Predictive, Plan-Based Methodologies

Question

A project team is working on relocating offices to another building and providing new furniture. The new furniture was purchased from an international vendor. The price was negotiated in a foreign currency, and due to changes in the exchange rate, the cost has increased by 10%. There is no contingency in the project budget. What should the project manager do?

Options

  • AEscalate this issue to the procurement team.
  • BEscalate this issue to the project sponsor.
  • CEscalate this issue to the chief financial officer (CFO).
  • DEscalate this issue to the project management office (PMO).

How the community answered

(60 responses)
  • A
    7% (4)
  • B
    77% (46)
  • C
    3% (2)
  • D
    13% (8)

Why each option

A 10% cost increase due to currency exchange rate with no contingency budget is a significant financial issue that exceeds the PM's authority to resolve alone, requiring escalation to the project sponsor who holds budget accountability. The sponsor is the appropriate first escalation point.

AEscalate this issue to the procurement team.

The procurement team manages vendor contracts and sourcing but does not have the authority to resolve a project budget shortfall caused by external currency fluctuation.

BEscalate this issue to the project sponsor.Correct

The project sponsor is the primary owner of the project's business case and budget authority, making them the correct escalation point when costs exceed the approved budget and no contingency exists. The sponsor can authorize additional funds, approve scope reduction, or engage executive stakeholders to find a resolution. Escalating to the sponsor follows the standard chain of authority before involving higher-level organizational roles.

CEscalate this issue to the chief financial officer (CFO).

The CFO is a senior organizational role; bypassing the sponsor to escalate directly to the CFO skips the standard escalation path and is premature.

DEscalate this issue to the project management office (PMO).

The PMO provides standards, governance, and support, but it does not have authority over individual project budgets or funding decisions.

Concept tested: Budget overrun escalation to project sponsor

Source: https://www.pmi.org/pmbok-guide-standards/foundational/pmbok

Topics

#Budget Management#Escalation#Project Sponsor Role#Risk Response

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