A new project manager was assigned to a project during implementation. The project manager realized that new tax policies are creating a risk for a cost overrun by 25%. The project manager updated the risk register and kept the project running as normal. The CEO has announced that the project could be cancelled since the acceptable cost overrun is only 20%. The project manager was quite surprised as this was new information. What should the project manager have done to avoid this?

While engaging stakeholders is important, it does not directly address the need for timely and effective communication of risks. The project manager may have engaged stakeholders, but without proper communication about the new tax policies and their implications, stakeholders, including the CEO, remained uninformed about critical project risks.

Although providing a risk response is essential, the project manager first needed to communicate the risk effectively to stakeholders. Without informing the CEO and other key stakeholders about the 25% cost overrun risk, the project manager could not implement an appropriate risk response or mitigation strategy.

Updating the risk tolerance is important; however, it is not a substitute for ensuring that all stakeholders are aware of the current project risks. The project manager's lack of communication meant that the CEO was unaware of the potential for cost overruns, leading to a misalignment in expectations regarding acceptable risk levels.