Context of the Organization – ISO 9001 / ISO 14001

Definition

The definition of Context of the Organization is “business environment“, “combination of internal and external factors and conditions that can have an effect on an organization’s  approach to its products, services  and investments and interested Parties“. The note states that this concept of Context of Organization is equally applicable to Not for profit organization, public service organization and governmental organization.Also in normal language this concept is also know as business environment, organizational environment or ecosystem of an organization.

Introduction:

The implementation of QMS  should be the strategic decision of the organization and is influenced by the context of the organization and the changes in that context. The changes in the context can be with respect to its specific objectives, the risks associated with its context and objectives, the needs and expectations of its customers and other relevant interested parties, the products and services it provides, the complexity of processes it employs and their interactions, the competence of persons within or working on behalf of the organization and  its size and organizational structure. The context of an organization will  include  internal factors such as organizational culture, and external factors such as the socio-economic conditions under which it operates. The scope of ISO DIS 9001:2015 states that organization needs to demonstrate its ability to consistently provide products and services that meet customer and applicable statutory and regulatory requirements and aims to enhance customer satisfaction.

Any interested party which is not relevant to the quality management system need not be considered and similarly any requirement of the interested party need not be considered. Determining what is relevant or not relevant is dependent on whether or not it has an impact on the organization’s ability to consistently provide products and services that meet customer and applicable statutory and regulatory requirements or the organization’s aim to enhance customer satisfaction. The organization can decide to determine additional needs and expectations that will meet its quality objectives. However, it is at the organization’s discretion whether or not to accept additional requirements to satisfy interested parties beyond what is required by this  Standard.

Clause 4 Context of the organization 

This clauses require the organization to determine the issues and requirements that can impact on the planning of the quality management system.Interested parties cannot go beyond the scope of ISO 9001.There is no requirement to go beyond interested parties that are relevant to the quality management system.Consider impact on the organization’s ability to consistently provide products and services that meet customer and applicable statutory and regulatory requirements or the organization’s aim to enhance customer satisfaction.Organizations can go beyond the minimum requirements to determine additional needs and expectations for interested parties that would not be “relevant” at the discretion of organization and should be clear in quality management system.

Clause 4.1 Understanding the Organization and its context

The organization should determine external and internal issues for the organization relevant to its purpose, strategic planning and which affect the organization’s ability to achieve its objectives . The Organization should monitor and review the information about external and internal issues. Management Review required the monitoring of external and internal issues. The organization must consider issues related to values,
culture knowledge and performance of the organization for understanding of internal issues. The organization must consider issues related to arising from legal, technological, competitive, market, cultural, social, and economic environments, whether international, national, regional or local for understanding of external context.

Clause 4.2 Understanding the needs and expectations of interested parties

The organization shall determine relevant interested parties and requirements of relevant interested parties. Interested parties include  Customers, Partners,Persons in the organization, External providers. Relevant interested parties to be considered are those that potentially could impact the organization’s ability to provide products and services that meet requirements. Monitor and review information related to interested parties and relevant requirements.Management Review requires the monitoring of relevant interested parties.

Clause 4.3 Determining the scope of the quality management system

The organization must establish scope of the quality management system by determining the the boundaries and applicability of the quality management system. While determining the scope the organization must consider the internal and external issues determined in 4.1.,the requirements of relevant interested parties in 4.2. and the products and services of the organization. Requirements that can be applied by the organization shall be applied. Requirements that cannot be applied cannot affect the organization’s ability to provide product and services that meet requirements. The organization must maintain scope as documented information. stating the Products and services covered by the QMS and any Justification where a requirement cannot be applied.

Clause 4.4 Quality management system and its processes

The organization must establish,implement, maintain and continually improve  its quality management system as per the requirement of  this standards by determining the process needed and its application through out the organization . While determining the processes, the organization must determine the inputs required and the outputs expected from these processes, the sequence and interaction of these processes,The organization must control these processes to ensure its effective operation. The organization must establish the criteria and methods which may include measurements and other  related performance indicators to control these processes. The organization must ensure the availability of the resources needed for effective operation of these processes.The personnel having authorities and responsibilities for these processes must be identified. The organization must analysis these organization for risk and analysis and must take appropriate action to address them. There must be methods for monitoring, measuring, as appropriate, and evaluation of these processes. The organization must make changes in its process if it fails to achieve result. The organization must look opportunities for improve for these process and for Quality management system as a whole. The organization shall maintain documented information to the extent necessary to support the operation of processes and retain documented information to the extent necessary to have confidence that the processes are being carried out as planned.

Understanding context

An organization’s context involves its “operating environment.” The context must be determined both within the organization and external to the organization. It is important to understand the unique context of an organization before starting the strategic planning.To establish the context means to define the external and internal factors that the organizations must consider when they manage risks. An organization’s external context includes its outside stakeholders, its local operating environment, as well as any external factors that influence the selection of its objectives (goals and targets) or its ability to meet its goals. An organization’s internal context includes its interested parties, its approach to governance, its contractual relationships with its customers, and its capabilities and culture.An organization’s internal context is the internal environment within which the organization seeks to achieve its sustainability goals. The internal context may include,

  • Product and service offerings
  • Governance, organizational structure, roles, and accountability
  • Regulatory requirements
  • Policies and goals, and the strategies that are in place to achieve them,
  • Assets (e.g., facilities, property, equipment and technology)
  • Capabilities, understood in terms of resources and knowledge (e.g., capital, time, people, processes, systems, and technologies)
  • Information systems, information flows, and decision-making processes (both formal and informal)
  • Relationships of the staff/volunteers/members and the perceptions and values of their internal stakeholders including suppliers and partners
  • Organization’s culture
  • Standards, guidelines, and models adopted by the organization and
  • Form and extent of the organization’s contractual relationships.

Internal context can also be defined as anything within the organization that may influence the way in  which the organization manages its internal risks.Once the  internal context is understood, one can conduct the macro-environmental external analysis using “PEST” (political, economic, social and technological) analysis.This  analysis determines which factors are can influence how the organization operates. The organization cannot control these factors, but they must seek to adapt to them. The PEST factors can be classified as opportunities and threats in a SWOT (strengths, weaknesses, opportunities and threats) analysis. Alternatively, some organizations might use Porter’s “Five Forces Model.” These methods are used to review a strategy or position or direction of an organization. Completing a pest analysis is simple and helps the individuals involved in the organization to understand and find ways to deal with the context.

 Political Factors  Economic Factors
 Ecological/Environmental Issues  National economies and trends
 Current legislation  General taxation issues
 Anticipated future legislation Taxation to activities, products, services
 International legislation (global influences)  Seasonality or other weather issues
 Regulatory bodies and processes  Market and trade cycles
Government policies, terms and change  Specific sector factors
 Funding, grants, and initiatives  Customer/end-user drivers
 Market lobbying groups  Interest and exchange rates
 Wars and conflicts  International trade and monetary issues
 Social Factors  Technology Factors
 Lifestyle trends  Competing technology development
 Demographics Associated/Dependent technologies
 Consumer attitudes and opinions  Replacement technology/Solutions
 Media views  Maturity of Technology
 Law changes affecting social behaviors  Information and communications
 Image of the organization  Consumer buying mechanisms
 Consumer buying patterns  Technology legislation
 Fashion and role models  Innovation potential
 Major events and influences  Technology access, licensing, patents
 Buying access and trends  Intellectual property issues
 Ethnic/Religious factors  Global communication
 Advertising and publicity  Social media use
 Ethical issues Maturity of  organization’s products/services

Although organizations cannot control macro-environment factors they need to manage them to their advantage. They also need to protect themselves from PEST factors which may increase operational costs or affect their reputation. The external context’s micro-environment consists of the organization’s immediate operations and how they affect its performance and decision-making. These factors have a direct impact on the success of the organization. It is important to conduct a full analysis of the micro-environment before moving to strategy development. Here are some of the micro-environmental context factors.

  • Customers:
    Organizations must attract and retain customers by offering products services that meet their needs along with providing excellent customer service
  • Employees:
    There must be availability of people with the motivation to remain as contributing members of the organization and develop the skills necessary to provide a competitive edge
  • Suppliers:
    Suppliers provide organizations with the resources they need to carry out their activities. If a supplier provides bad service, this affects the way the organization operates. Close supplier relationships are an effective way to remain competitive and secure the resources needed
  • Investors:
    All organizations require investment to grow. They may borrow the money from a bank or have people invest in their work. Relationships with investors need to be managed carefully as problems can detrimentally affect the long term success of the organization
  • Media:
    Positive media attention can bring success to the organization by maintaining its reputational strength. Managing the media (including the presence in social media) is a challenge.
  • Competitors:Members of the organization need to have a sense of belonging. Can the organization offer benefits that are better than those offered by the competitors? Is there a strong value proposition? Competitor analysis and monitoring is crucial if an organization is to maintain or improve its position in the competitive landscape of the community. The organization must always be aware of its competitor’s activities. The landscape can change quickly.

As in the case of the macro-environmental context, the organization cannot always control its micro-environment factors. But they must be carefully managed together and with the internal context understanding..

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