The trick is to deliver the bad news and
your recommendation(s) to address the problem. Management wants to hear about bad news so that they have a chance to do something about it before it's too late. Getting bad news also builds their confidence in you as a project manager, because it tells them that you are on top of your project's progress and problems. But it's not enough to lay problems in their laps. They also want to know you have evaluated the impact of the situation, considered options to address the situation, and used your knowledge of the business implications to recommend solutions.
Sound daunting? It does seem like a tall order, especially if you're very new at managing projects, and/or your organization has a surplus of prickly executives who make it especially unpleasant to deliver bad news. The good news for any project manager is that this skill can be learned. It's one that will absolutely be worth it on your projects and for your career.
So to get ready to communicate to your executives about the current bad news, first make sure you understand the bottom-line impacts to the project. Is this problem threatening the schedule, the budget, or the scope goals of the project, or all three? One tool you can consider using is the Project Alternatives Tradeoff Table. It shows you how to work with the team and come up with different options for the project going forward, compare them, assess how well each alternative would meet the original project objectives, and frame a recommendation for the executives.
Before you have to get up in front of a group of executives, where is your project sponsor? Their role is to support the project. That includes helping in times of trouble, rather than being on the other side of the table shooting at you when things go wrong. So find your sponsor and talk to them as soon as a serious problem comes up, and as you look at possible alternatives for solving the problem and going forward. Get their support for your recommendations before you have to go present to anyone else—the sponsor should be supporting you in those meetings too!
When you get ready to actually communicate—reporting status in a meeting, for example—another useful tool is the Issue Resolution Status Report. This is a simple slide format for documenting not only an issue, but also what's being done about it, including a simple timeline of steps and dates. That kind of information shows the executives you're on top of wrestling this problem to the ground.
Overall, be sure to put time into learning more and more about the business from your manager and others. The more you understand about the "business context" of your projects, the more natural it will feel to analyze and suggest ways to recover from project issues, and even find ways to meet the most important project objectives in spite of the big problem. Read the article "The Medal-Worthy PMs Executives Are Desperate to Hire", which provides some executives' perspectives on what they desire from their project managers—and how even those executives seen as most likely to "shoot the messenger" are really just asking the project manager for certain types of information and taking responsibility.