2026 will see the continuation of recent trends pertaining to increased regulatory scrutiny and elevated risk from missed obligations. According to Gartner, legal and compliance department investment in governance, risk, and compliance tools will increase 50% by 20261 - and it's clear to see why! Modern CLM software - such as CobbleStone Contract Insight® - helps automate obligation oversight, reduce risk, and get a firm grasp on compliance. Here's how.
Why Obligation Oversight Matters Now
When obligations are not tracked or enforced, the value of contracts is sliced into ribbons. In fact, Deloitte2 found that average value erosion from poor contracting accounts for around 8.6 percent of value/revenue; worst-case scenarios exceed 15 percent. Meanwhile, organizations are experiencing a shift in what matters, with many executives prioritizing faster compliance cycles, audit-ready evidence, and reducing revenue leakage. Overall, there is a disconnect between what matters and how effectively it's being addressed.
What "Contract Obligations Oversight" Actually Includes
Overseeing contract obligations effectively necessitates considering a myriad of tasks and resources. Obligation tasks include:
- deliverables.
- SLAs.
- payment terms.
- notices.
- credits.
- renewals.
- compliance milestones.
- linked clauses and counterparties.
Additionally, obligations oversight involves tracking contracts post-signature across various departments, including legal, procurement, and finance. Successful contract obligations management involves a single source of truth. Repository. Structured data. Workflows. Evidence...all rolled into one! Business professionals need to keep an eye on what matters: notice periods, renewal dates, regulatory filings, insurance, COI, and data processing obligations (think GDPR).
Why Legacy Methods Fail (Spreadsheets & Email)
Yes, spreadsheets and emails alone are doomed to fail. Scattered data will be hard to locate and leverage. Manual data tracking will lead to missed obligations. Siloed ownership will cause approval bottleneck chaos. A lack of audit trails will create contract version limbo. Slow escalation will decrease accountability and delay execution.
The list goes on.
It's no wonder value can erode - there are many areas in which things can go awry! Contract data scattered across disparate systems doesn't stand a chance at being utilized properly and promptly.
How AI-Powered CLM (Yes, Like CobbleStone) Fixes It
Contract management software powered by contract intelligence can auto-extract obligation terms, clauses, dates, parties, metadata fields, and more while suggesting playbook language for optimal positioning. Obligations can become like trackable objects with owners. A rules-based configuration can trigger alerts, escalations, and approvals. Users can also use workflows for renegotiations.
Furthermore, custom and ad-hoc reports and dashboard contract management can help users summarize the state of obligations by contract, vendor, or business unit, while informing them of upcoming notices, savings opportunities, and more. Full-text and field search, numbered versioning, and logs comprise audit-ready evidence that executives want.
Finally, AI-powered CLM can seamlessly integrate with ERP, eSignature, eProcurement, finance, and other mission-critical processes to maintain a single source of truth across all processes.
Best Practices for Optimal Obligations Oversight
Once users have the tools for optimal contract compliance oversight, they should ensure that these tools and processes are functioning smoothly. As such, periodic audits should be performed on an automated, scheduled basis on CLM software to ensure all obligations are being met.
The more cooks in the kitchen (or key business users involved with a contract), the higher the potential for things to get confusing. Thankfully, with CLM software, key business users can be assigned to specific tasks, and these tasks can be escalated if a resource is unable to perform them for any reason. That way, all users can be sure "who" is doing "what" in a timely manner!
Busy contract management personnel need a straightforward way to analyze contract performance so that they can inform their strategy quickly and effectively. Thankfully, AI-powered CLM software provides visually engaging dashboards and reports that offer key contract analytics at a glance.
With CLM software, users can enjoy heightened visibility into obligations and streamlined oversight.
Want to see how YOU and YOUR ORGANIZATION specifically can benefit?
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*Legal Disclaimer: This article is not legal advice. The content of this article is for general informational and educational purposes only. The information on this website may not present the most up-to-date legal information. Readers should contact their attorney for legal advice regarding any particular legal matter.
