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Best Practices in Governance is the umbrella term for how an organization approaches governance, risk management and compliance (GRC). For investors, this set of domains can be referred to as Environment, Social and Governance (ESG). This area includes the
- Corporate Governance. This function is concerned primarily with financial securities market regulatory reporting on accountabilities for senior executives and the board of directors, and became a fixture in all US public companies after passage of 2002’s Sarbanes‐Oxley law.
- Risk and Compliance. Compliance with statutory or contractual requirements has long been a key element of companies’ risk management functions, yet is also becoming important to companies who seek competitive advantage by exceeding mere compliance for greater pricing or market power.
- Legal. GRC nearly always report directly or indirectly to the office of general counsel at public companies.
- Business Ethics. As companies reach beyond compliance, business ethics officers are active in setting behavior standards organization‐wide, especially in businesses with far‐flung operations, government contracts, or large third‐party relationships that may be subject to influence peddling.
- Legislative and Governmental Affairs. Lobbying operations and legislative‐affairs functions often report into the same line as GRC function.
- Supply Chain Compliance. Managing the company’s supply chain for compliance with local regulations and company policies is becoming increasingly important, as suppliers are ever‐more considered to be legally linked with the company.