In the fundraising world, due diligence is a meticulous process through which possible investments or contributions are thoroughly analyzed. It includes going beyond the surface to collect evidence of claims made by the organization, such as contracts, performance testing results, and market research data. The aim is to determine and minimize any risks that may negatively impact the company.
The need for thorough donor due diligence is highlighted by recent scandals that have tarnished the reputations of many philanthropic organizations. For instance institutions that named buildings after convicts in the US and UK were quickly criticized by the media and ended up losing a substantial amount of philanthropic funds.
But, critics say that a rigid approach to due diligence can deter donors from making generous donations. This argument argues for a balanced approach that focuses on identifying reputational risks but doesn’t impose unreasonable high limits on a donors privacy rights.
It’s crucial to have a secure and central platform that allows you to share and organize information with all stakeholders, regardless of whether it’s for the purpose of fundraising or a due diligence. This will allow you to locate relevant documents at the time of a request, and reduce the time spent searching for important agreements. Virtual Data Rooms (VDR) are an extremely popular tool for collecting and organizing due diligence information because 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 procedure should be able of incorporating public online data to support the detection of reputational and operational risks. The vast amount of publicly accessible information spans from news articles and corporate blogs to numerous databases and grey literature. A central, efficient and flexible data collection process that incorporates this information available to the public can enhance the efficiency of your efforts and allow you to avoid costly mistakes.
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