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Due diligence is an important aspect of fundraising as well as mergers and purchases and corporate finance. Due diligence is an essential part of donor research. A well-done investigation can help identify potential risks to reputation and help teams write thorough profiles of donors. In the wake of recent scandals involving universities that named buildings after people who have committed financial crimes, a number of organizations are reviewing their donor due diligence policies to ensure they’re effective and up to date.

An exhaustive due diligence investigation isn’t an easy job and can only be accomplished if your team has the right tools at hand. Even the most powerful teams be a challenge to navigate through the ever-growing volume of publicly accessible data online, including news media, corporate blogs, and the grey literature. Tools for specific software are required to organize, locate and share this information.

The COVID-19 epidemic has accelerated the development of new tools and techniques to identify potential risk to reputation for donors and reducing the time needed to conduct donor research. However, despite the rapid evolution of tools and practices in this field, it is important that institutions preserve the most important parts of their due diligence process, for example, the importance of thorough background research on donors and their families and the need to develop clear and consistent policies to reduce the risk of a reputational loss and accepting gifts from potential donors.

Anyone who has seen Shark Tank or any show where millionaire investors put start-up entrepreneurs through their trials will be familiar with the concept of due diligence. Investors aren’t likely to invest in a company until they are completely satisfied with all the documents and information presented to them, including those pertaining to legal, financial and tax compliance. This is why it is essential for startups to prepare for the due diligence process in advance, by having all documents and other information ready for investors prior to the time of the pitch.