Contract Obligation Management — Who Needs It & Why
Simply expressed, contract obligations are the legal responsibilities that the contracting parties have promised to fulfill. For example, a sales contract includes obligations of payment, delivery, quality of goods, etc. There are many contract obligation commitments formed to uphold expectations whenever two parties exchange a product or service with a high value. For example, when you bring in a new employee, they promise to provide your company with a service in exchange for payment.
According to an IACCM study, only 29% of organizations regularly collect data on compliance with standards/scorecards by other parts of the business or trading partners.
Contractual obligations are really exhaustive, complicated, inaccessible to manage, and most often, the forgotten risk management tool. Failure to fulfillment of contractual obligations can result in:
- Penalties and litigations
- Overpayments and overpricing
- A damaged business reputation
- Injured customer relationships
- Underperforming vendors
Challenges in managing contractual obligations
- Managing contractual obligations can be difficult and tedious, especially when identifying and tracking them at scale.
- When an agreement’s terms are poorly tracked, and obligations are not met, your company opens doors for unnecessary breaches or missed opportunities.
- Furthermore, failure to comply with contractual obligations can lead to a breach of contract and represent a potentially severe latent risk to the business and must be closely managed.
With an automated contract management solution, your company can easily keep track of its responsibilities. Such software offers several features, including editorial, improved workflow, notifications, and alerts, so that your legal obligations are well managed and followed on all sides.
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A legal professional or contract manager can set the contractual obligation, but in most cases, the responsibility is to ensure that the contract meets the agreed requirements.
Effective contract management systems should provide more transparency and control over where contractual obligations are to be tracked and fulfilled, such as efficiently managing contract documents and milestones.
The tasks have a specific set of milestones that help monitor progress. The functions provide the stakeholders with necessary and temporary user warnings and email notifications about various actions that can be carried out for their service. It also offers relevant reports to senior management and managers at different levels of the organization to search for responsibilities. In addition, other contract management functions, such as contract authorization, update updates, legal clause libraries, workflows, redesign functions, and more, offer comprehensive capabilities to handle complex task management situations.
Invest in AI-enabled Solution
Aavenir Obligationflow, using Artificial Intelligence-enabled contextual search, enables organizations to have 360-degree visibility into enterprise-wide contractual obligations. It includes commitments for customers, suppliers, service providers, sales partners, and other parties — Organizations can auto-discover key contracts obligations and collaborate with the related stakeholder to monitor the compliance status via the Obligationflow dashboard on ServiceNow.
Aavenir Obligationflow can instantly import all active contracts from Aavenir Contractflow or any other CLM system and transform how organizations identify, manage, and fulfill obligations previously hidden in complex contract language.
