Due diligence is an essential part of the fundraising process. Due diligence research is essential to ensure that relationships with philanthropists are ethical and productive.
The process is not without its challenges. Inconsistent implementation and resource allocation could result in a sporadic approach, which can reduce the trust of donors. Data security concerns are also raised when nonprofits fail in their obligation to secure sensitive information. In fact the misuse of donor information is becoming a major concern for the entire sector especially when it comes to major and principal gift fundraising.
It has never been more vital to conduct thorough due diligence research. In today’s digital world the news can be spewed quickly and reputational damage – particularly for nonprofits – can last for a long time.
It is also crucial to begin early. The delay until a prospective client has been identified and developed is often a sign that reputational risk issues are identified too late, potentially wasting resources and energy on a relationship that goes against the company’s values.
It is important to have a standard and unifying policy that includes clearly defined criteria. This makes it easier for teams to identify and address risks before they become an issue. A centralized repository for all due diligence documents is beneficial, too to be able to offer them to investors at the drop of a hat when the need arises. A flexible and automated data room can due diligence and fundraising processes make a huge difference.