Internal Obligation- Definition
Internal obligations are commitments that your organization has imposed on itself voluntarily or through an agreement with a third party. Internal obligations are generated through the activities your business engages in.
Examples of Internal Obligations:
- Corporate policies
- Environmental permits
- Stakeholder engagements
External Obligation- Definition
External obligations, on the other hand, are requirements imposed on an organization by third party external bodies.
Examples of External Obligations:
- National/regional/local laws
- Industry-specific regulations
- ISO international standards (e.g. ISO 14001- environmental management)
What is Obligation Management and Why it’s Important to Compliance
Most organisations do not know all of their obligations and that doesn’t come as a surprise since a typical facility has around 3,000 compliance obligations and 200 new ones per year to keep track of. Yet, inability to ensure compliance to these requirements can lead to violations, spills, product recalls, worker injuries, and more dire consequences.
Obligation Management is the process of cleaning up your legal register, removing waste, and improving your overall coverage to prepare for the future. With proper obligations management, organisations can significantly reduce the risks of non-compliance and better focus on operating their businesses.
For internal obligation management best practices, check out Nimonik’s Internal Obligations Management Webinar.
Achieving Compliance Maturity through Obligation Management
An organization achieves Compliance Maturity when it achieves and maintains a proactive approach to managing internal and external obligations driven by integrated policies, processes and procedures. This requires strong leadership, and crucially buy-in from all its staff, contractors and partners. As a result, the organization’s culture is one that readily addresses risk, knows its obligations, and assigns responsibility across all levels of planning, operations, and monitoring.
Strong management of an organization’s voluntary internal obligations is not only a core part of your compliance efforts, it also is a powerful way to promote a company culture of compliance. By voluntarily adhering to standards, permits, and policies, an organization is setting itself up to tackle all of its requirements. Once you have identified your internal obligations, it is time to map them to your internal systems, evaluate conformance and develop internal control mechanisms to ensure you meet your compliance obligations. With internal obligations under control, you will be prepared to identify, map, and track its external obligations.
Integrating the Principles behind Obligation Management Across Your Organization
Recognizing that you will move from a reactive and piece-meal approach to compliance to a proactive one is the critical first step. However, in order to achieve Compliance Maturity organizations need to integrate compliance procedures and systems across your structures, departments, and teams. Too often compliance stays in the hands of a few people and is not well communicated across the organization. Failure to integrate your teams will lead to the perception that compliance is someone else’s problem and not part of everyone’s responsibilities. It is only with organizational buy-in that compliance obligations can be effectively tracked, monitored for changes, and assessed for applicability.
Well-mapped Internal Obligations form part of Internal Control Mechanisms that ingrain a culture of compliance. These include but are not limited to:
- Published Internal Obligations, e.g. Standards and Policies
- Documented Procedures, accessible to all relevant stakeholders
- Training, on an ongoing basis, including refresher training
- Monitoring, by company administrators and team leaders
- Internal audits, scheduled and assigned to responsible parties
These mechanisms and tools are usually administered centrally, but the data should be readily available to all concerned parties. It is possible to reduce the administrative burden with information management systems such as Nimonik, but no software will do all the work for you.
To make compliance a reality in your organization, you need to allocate the time and resources. If done right, the management of internal and external obligations is an investment that will pay dividends. That investment can create motivated and engaged team members that drive a culture of compliance and ensure successful data integration that leads to Compliance Maturity.
Find out more about Compliance Maturity
Already a Nimonik User?
With the help of NimonikApp, we have created a Best Practices guide to achieve Comprehensive Compliance. Click here to read more about the optimal management of internal obligations.
Find out how Nimonik can help you
Nimonik helps you manage your Internal and External Obligations, Audits and Actions. Click here and sign up for a 20-day Free Trial!