Terms of Reference (ToR) are a fundamental governance document that define how a committee operates, makes decisions, and fulfills its responsibilities. Regulatory guidance and corporate governance best practices emphasize clarity and accountability in committee mandates.

The extent of power and decision-making authority must be clearly defined to ensure members understand what decisions they are authorized to make and where escalation is required. This prevents overlaps or governance gaps.

The composition and structure of the committee, including membership criteria and roles, ensures appropriate expertise and representation. This is essential for effective oversight, particularly in AML/CFT and risk committees.

Delegation of authority outlines how responsibilities may be assigned or escalated, supporting efficient decision-making while maintaining accountability.

Organization charts and company culture statements are not typically core components of a ToR, as they do not define operational authority or governance mechanics.