Due diligence is a key element of fundraising processes in mergers and acquisitions and corporate finance. It is also an essential component of donor research, and a well-done due diligence investigation can help to identify potential risks to reputation and guide teams in the creation of comprehensive donor profiles. Many organizations are reviewing their due diligence practices in light recent scandals that have been involving universities naming buildings in honor of individuals who committed financial crimes.
A thorough due diligence investigation isn’t a simple task and can only be achieved if your team is equipped with the right tools on hand. The ever-growing amount of publicly accessible online data from a variety of news media sources, corporate blogs and grey literature, can be overwhelming for the largest teams and requires specialized software tools to find, organize and distribute information effectively.
The COVID-19 pandemic has accelerated the development and application of new techniques and tools to identify potential reputational risks in donors and cut down the time needed to conduct research on donors. Despite the rapid development of tools in this field, institutions must retain the most crucial aspects of their due diligence process including the need to conduct thorough background checks on donors and their family members and the necessity of having clear and consistent policies regarding limiting reputational risks and accepting gifts from donors.
Anyone who has watched Shark Tank or any show that saw millionaire investors put new entrepreneurs through their tests will be familiar with the concept of due diligence. Investors will not invest in a company until they are completely satisfied with all the documents and data presented to them, including those pertaining to financial, legal, and tax compliance. This is why it is vital for startups to prepare themselves for due diligence prior to the time of pitch, by having all the documents and information ready for investors prior to the time of the pitch.