Due diligence is a crucial element of fundraising processes. Due diligence research is vital to ensure that philanthropic partnerships are productive and ethical.
However this process isn’t without challenges. Inequal implementation and resource allocation can lead to a patchy, inconsistent approach, which could cause distrust among donors. In addition, data protection concerns arise when organizations fail to protect sensitive information. The misuse of donor information is a growing problem for the entire industry.
The need for comprehensive due diligence research is never more urgent. In the digital age news quickly spreads and reputational damage – particularly for nonprofits – can last for a long time.
It’s crucial to start early. If you wait until the possibility has been discovered, it’s possible that reputational risk is not recognized in time. This could result in spending time and money in a partnership that goes against your principles.
The key is having a uniform, consistent policy that has clearly defined criteria for reviewing. It’s much easier for teams to recognize risks and tackle them before they become a major issue. It’s also helpful to have one central repository for all the due-diligence documentation so you can give them to investors upon request. A flexible, automated data room can make a big difference.