The Governing Authority’s Responsibilities in Compliance and Risk Management, As Seen in the American Law Institute’s Draft Principles of Compliance, Risk Management, and Enforcement

Abstract

This Essay discusses the project on compliance and risk management of the American Law Institute in relation to the governance of compliance and risk management in an organization. It identifies several important governance issues and debates that have emerged in the drafting process. These issues are (i) the appropriate role of what the project calls the “highest legal authority” in compliance and risk management and (ii) the related topic of to whom internal control officers, particularly the chief compliance officer and the chief risk officer, report. While discussing the importance of, and the project’s approach to, these issues, the Essay emphasizes that the project provides flexibility to organizations, which reflects the diversity of organizational practice on these, and other, governance issues.

Keywords: Governance, Compliance

JEL Classification: K22