In the fundraising world due diligence is a thorough procedure whereby possible investments or contributions are thoroughly analyzed. It is about looking beyond the surface to find evidence of claims of the organization like contracts, performance testing results, and market research data. The goal is to discover any risk that could adversely affect the business and to minimize their impact.
The importance of ensuring that donors conduct due diligence is highlighted by recent scandals that damaged the reputations of several foundations and philanthropic institutions. The media has criticized universities in the US and UK that named buildings after convicted criminals. They lost significant donations to philanthropy.
However, critics believe that a too strict approach to due diligence could discourage donors from generous giving. This perspective emphasizes the need for a balancing approach that focuses on identifying the risk to reputation, but does not impose undue restrictions on a donor’s right to privacy.
It is essential to have a safe, central platform that allows sharing and organize information with all parties involved, whether it’s for an event like a fundraising or due diligence process. This will allow you to quickly locate the documents needed and reduce the time it takes to find important agreements. Virtual Data Rooms (VDR) are a popular tool for organizing and collecting due diligence information as they allow you to host, index and share confidential documents with many users from a central location.
In addition to VDR software in addition, a unified fundraising as well as due diligence process must be able of incorporating publicly available data to aid in the identification of reputational and operational risks. This vast collection of publicly available information ranges from corporate blogs and news articles to a myriad of databases and grey literature. A central, flexible and intelligent process for data collection that can incorporate this information into your system will increase the effectiveness of your team’s activities and ensure that you don’t make costly mistakes.
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