Due diligence is an important part of the fundraising process. Due diligence research is crucial to ensure that relationships with philanthropists are productive and ethical.
The process isn’t without challenges. Inequal implementation and resource allocation can lead to a patchy and inconsistent approach, which could undermine donor trust. Concerns about data protection are also raised when nonprofits fail in their obligation to secure sensitive information. The misuse of donor data is a growing concern for the entire industry.
The need for thorough due diligence research has never been more pressing. In the digital age, news spreads quickly and reputational harm – particularly for nonprofits – can be sustained for quite a long time.
It is crucial to begin early. If you wait until the prospect is discovered, it’s possible that reputational risks are not identified in the right time. This could lead to the waste of time and energy on a relationship which goes against your values.
It is crucial to have a consistent unifying policy that has clearly defined criteria. It’s much easier for teams to identify risks and address them before they become a major issue. It’s also helpful to have a central repository for all documents related to due diligence so you can give them to investors on demand. A scalable automated data room can make a huge difference.