Principles of the Law, Compliance and Enforcement for Organizations, Tentative Draft No. 2 (TD2) will be presented to ALI membership at the 2021 ALI virtual Annual Meeting. The below Introductory Note and black letter is excerpted from this draft, which contains § 4.01. Nature of Compliance Risk and Compliance Risk Management. The full Section, including full Comments and Reporters’ Notes, may be downloaded following the link at the end of this post. TD2 also includes § 4.02. Goals of Compliance Risk Management. Click here to request a copy of this draft.

This Tentative Draft has not yet been considered or approved by ALI membership. Therefore, it does not represent the position of The American Law Institute and should not be represented as such.

PART TWO. COMPLIANCE

CHAPTER 4. COMPLIANCE RISK MANAGEMENT

Introductory Note: This Chapter is about compliance risk management. Organizations manage compliance risk in the context of, and as part of their broader management of, all the risks they face. Organizations also have compliance functions, and their management of compliance risk will be integrally involved with that function. This Chapter references an organization’s broader risk-management and compliance endeavors when appropriate. Given that Chapter 5 expressly deals with the compliance function, this Chapter focuses more on compliance risk in relation to the organization’s overall risk management, characterizing compliance risk management as a type and part of risk management when appropriate.

§ 4.01. Nature of Compliance Risk and Compliance Risk Management
(a) An organization should manage compliance risk in a manner appropriate for its attributes and circumstances.
(b) An organization should manage compliance risk through or in coordination with its risk-management function and risk-management program, and through or in coordination with its compliance function and compliance program.

PDF of § 4.01. Nature of Compliance Risk and Compliance Risk Management, and § 4.02. Goals of Compliance Risk Management (includes select TD2 front matter with Projected Overall Table of Contents).

Claire A. Hill

Associate Reporter, Compliance, Risk Management, and Enforcement

Claire Hill is the James L. Krusemark Chair in Law at University of Minnesota Law School. She teaches corporate law, mergers and acquisitions, contracts, and a seminar in law and economics. She is the founding director of the Law School’s Institute for Law and Rationality, and the associate director of its Institute for Law and Economics. She is also an affiliated faculty member of the University’s Center for Cognitive Sciences. Before becoming a law professor, she practiced corporate law at several law firms. Her research interests include corporate governance, capital structure, structured finance, rating agencies, secured debt, contract theory, law and language, and behavioral economics.

Jennifer H. Arlen

Associate Reporter, Compliance, Risk Management, and Enforcement

Jennifer Arlen, the Norma Z. Paige Professor of Law at NYU Law School, is one of the nation’s leading scholars on corporate liability, specializing in corporate crime, vicarious liability, and securities fraud. She also has written extensively on medical malpractice liability and experimental law and economics. Arlen received her BA in economics from Harvard College and her JD and PhD in economics from New York University. She is co-founder and director of the NYU Program on Corporate Compliance and Enforcement. She also is a co-founder, director, and past president of the Society of Empirical Legal Studies, is a former director of the American Law and Economics Association, serves on the editorial board of the American Law and Economics Review, and chaired the Law and Economics, Remedies, and Torts sections of the Association of American Law Schools.

James A. Fanto

Associate Reporter, Compliance, Enforcement, and Risk Management

James Fanto, Gerald Baylin Professor of Law at Brooklyn Law School, teaches courses on banking, broker-dealer law, regulation and compliance, corporate and securities law, corporate finance, and comparative and international corporate law and governance. His extensive writings and lectures both in the United States and abroad focus on the law relating to banks, broker-dealers, corporate boards, comparative corporate governance, cross-cultural securities disclosure and merger decision making. He is the co-director of the Center for the Study of Business Law and Regulation, and is affiliated with the Dennis J. Block Center for the Study of International Business Law, and the Center for Law, Language & Cognition.

Geoffrey P. Miller

Reporter, Compliance, Enforcement, and Risk Management

Geoffrey Miller, Stuyvesant P. Comfort Professor of Law at NYU Law School, is author or editor of eight books and more than 200 articles in the fields of compliance and risk management, financial institutions, corporate and securities law, constitutional law, civil procedure, legal history, jurisprudence, and ancient law. He has taught a wide range of subjects including property, corporations, compliance and risk management, financial institutions, land development, securities, the legal profession, and legal theory.

Pauline Toboulidis

The American Law Institute

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