How to Transition from Obligation Management to Managed Obligations

Obligation Management and Managed Obligations – the two concepts that are often confused, but have distinct differences. This article outlines how to differentiate them to effectively manage your obligations.

In today’s complex business environment, organizations face an increasing number of legal, regulatory, and voluntary obligations. Managing these obligations is essential for organizations to ensure they are fulfilling their commitments in a transparent, accountable, and efficient manner. To accomplish this, organizations may focus on compliance activities, which are referred to as Compliance Management.

At a high level, Obligation Management involves the practice of identification, monitoring, and verification of an organization’s adherence to legal, regulatory, and voluntary obligations. This responsibility falls within the purview of the compliance and audit functions of the organization and serves as a foundational element of your compliance maturity.

On the other hand, Managed Obligations represent a more systematic approach with a specific focus on outcomes of compliance. This approach requires the integration of compliance into an organization’s culture and strategy with the objective of establishing appropriate behaviors and procedures to fulfill obligations throughout their entire lifecycle. This enables organizations to fully realize the benefits of compliance while accounting for the associated costs.

Characteristics of Managed Obligations

In the context of compliance management, Managed Obligations can be seen as the ultimate goal. It represents a significant milestone in compliance maturity that goes beyond the basics of identifying obligations, tracking commitments and assessing risks. Managed Obligations require a more strategic and holistic approach. This approach allows organizations to go beyond mere compliance and instead fully embrace their obligations, enabling them to realize the benefits of compliance while efficiently managing the associated risks and costs. Achieving Managed Obligations is a key indicator of compliance maturity and a critical step towards building a culture of compliance within an organization. It demonstrates that an organization has gone beyond the minimum and has fully integrated compliance into its operations.

Key properties of Managed Obligations

· Clarity: Properly managed obligations are clearly defined, with specific goals, timelines, and responsibilities established.

· Consistency: Obligations are managed consistently, with a clear process in place for identifying, prioritizing, planning, executing, and reviewing obligations.

· Conformance: Obligations are managed in compliance with relevant laws, regulations, and ethical standards, ensuring that the individual or organization meets legal and ethical requirements.

· Accountability: There is a clear system of accountability in place, with individuals or teams taking responsibility for fulfilling obligations.

· Transparency: The management of obligations is transparent, with information shared openly and stakeholders kept informed about progress and outcomes.

· Efficiency: Obligations are managed efficiently, with resources allocated effectively to ensure that obligations are fulfilled in a timely and cost-effective manner.

· Continuous improvement: Properly managed obligations are subject to ongoing review and improvement.

Overall, the properties of managed obligations reflect a systematic and proactive approach to fulfilling commitments, ensuring that the individual or organization meets its responsibilities in a transparent, accountable, and efficient manner.

Transition to Managed Obligations

To move from Obligation Management to Managed Obligations, the following steps helped by a standardized management standard such as ISO 37301:2022 (CMS) are recommended:

1. Develop a comprehensive understanding of obligations: This step involves identifying and understanding all legal, regulatory, and voluntary obligations that apply to the organization.

ISO 37301 emphasizes the importance of understanding legal requirements and other obligations that apply to the organization in order to establish an effective compliance management system.

2. Prioritize obligations: Once all obligations have been identified, organizations should prioritize them based on their impact on the organization’s operations, reputation, and stakeholders.

ISO 37301 requires organizations to prioritize compliance risks based on the potential impact on the organization and allocate resources accordingly.

3. Integrate obligations into the organization’s strategy: Organizations should integrate obligations into their overall strategy to ensure that compliance is embedded in their business practices.

ISO 37301 emphasizes the need to integrate compliance into the organization’s strategy and culture to establish a culture of compliance.

4. Establish a compliance culture: Organizations should establish a culture of compliance that promotes ethical behavior and encourages employees to take responsibility for compliance.

ISO 37301 emphasizes the importance of establishing a compliance culture and providing training and resources to employees to promote compliance.

5. Monitor and measure compliance: Organizations should monitor and measure their compliance with obligations to ensure that they are meeting their requirements. This includes establishing KPIs to track compliance and conducting regular audits and assessments.

ISO 37301 requires organizations to monitor and measure compliance with legal requirements and other obligations to ensure that the compliance management system is effective.

6. Continuously improve: Organizations should regularly review their compliance management system and make improvements as necessary to ensure that they are meeting their obligations effectively.

ISO 37301 emphasizes the need for continuous improvement and requires organizations to continually review and improve their compliance management system.

As can be seen, transition from Obligation Management to Managed Obligations is similar to requirements of the ISO 37301:2022 standard. This affords organizations with a certifiable framework recognized globally for establishing, implementing, maintaining, and continually improving a compliance management system within an organization.

Benefits of Managed Obligations

There are several benefits to implementing a Managed Obligations approach within an organization, including:

Reduced legal and regulatory risks: By managing obligations strategically and proactively, organizations can identify and mitigate potential compliance risks before they become a problem. This is by far the highest impact area. Prevention is worth its weight in gold.
Improved operational efficiency: A managed obligations approach promotes greater clarity, consistency, and efficiency in compliance processes, reducing duplication of efforts and minimizing disruptions to operations.
Increased stakeholder trust: By demonstrating a commitment to compliance and ethical behavior, organizations can build trust with stakeholders, including customers, investors, and regulatory bodies.
Enhanced reputation: A culture of compliance and ethical behavior can enhance an organization’s reputation, making it more attractive to customers, investors, and potential employees.
Competitive advantage: Organizations that implement a managed obligations approach may gain a competitive advantage over those that do not, particularly in industries that are heavily regulated or where ethical behavior is a critical factor in decision-making.

Conclusion

Effectively managing obligations is critical for organizations to fulfill their commitments in a transparent, accountable, and efficient manner. Managed Obligations represent a more strategic and holistic approach to managing obligations, with a specific focus on compliance outcomes. Establishing capabilities to achieve Managed Obligations is a key indicator of compliance maturity and a critical step towards building a culture of compliance within an organization.

Organizations that want to move from Obligation Management to Managed Obligations can follow ISO 37301:2022 (CMS) standard. By following this standard along with best practices to manage obligations, organizations can establish a culture of compliance that promotes ethical behavior and accountability, and ultimately build trust with their stakeholders.

Join us for our upcoming webinar where we will take a deep dive into the ISO 37301 standard and outline steps to implement it within your organization.