Due diligence is an essential element of fundraising. Due diligence research is necessary to ensure that relationships with philanthropists are productive and ethical.
The process isn’t without challenges. Uneven implementation and allocation of resources could result in a sporadic and inconsistent approach that can cause a loss of trust among donors. Data security concerns also arise when nonprofits fail in their responsibility to protect sensitive information. In reality the misuse of donor information is an increasing concern for the entire industry, particularly when it comes to major and principal donation fundraising.
The need for comprehensive due diligence research has never been more pressing. In this day and age, information propagates quickly and reputational harm can last for a long time, particularly for non-profit organizations.
It’s also important to start early. If you wait until the prospect is identified, it is possible that reputational risk is not discovered at the right the time. This could result in being wasting time and energy in a partnership that goes against your values.
The key is to have an unifying, standardized policy that has clearly defined criteria for reviewing. This way, it’s easy for teams to recognize and deal with risks before they become an issue. It’s also helpful to have a central repository for all documents related to due diligence in order to make them available to investors upon request. A scalable and automated data room can make a huge difference.