How the University of Michigan built a due diligence and risk assessment process

Around 2018 and 2019, the University of Michigan started noticing troubling behaviours from philanthropists. Several high-profile incidents at various institutions prompted the university to reassess its risk management and philanthropic due diligence processes. The research team led the development of this process, working closely with senior leadership, as well as legal and compliance teams. They also reached out to other institutions to learn about their approaches.

By 2020, they began implementing the new process. The university set the threshold for due diligence at $5 million or more because this amount is often tied to significant recognition events on campus. To ensure fairness, major donors also undergo renewed due diligence for any new gifts.

Listen to its Executive Director of Pipeline Development and Strategic Initiatives and its Assistant Director of Development Research, Presidential Engagement and Donor Experience explore this in more detail here.

The research briefing phase 

From the start, the research team worked closely with the legal team to ensure donor risk assessments and briefings accurately addressed legal and reputational issues, rather than relying solely on the research team’s interpretation. For example, legal issues related to real estate, such as property liens, were unclear in terms of risk level.

During the research phase, the team creates a briefing and shares it with the legal team. Initially, the research team struggled with what might emerge during the briefings, which made it difficult to determine the depth of their investigation. As a result, they gathered too much information, sometimes spending 35 to 40 hours on a single report.

When the legal team identifies risks, they assess the implications of the information. If they need further investigation into a lawsuit or other legal issues, they may forward the briefing to their clerks. The legal team then shares their commentary with the research team, who discusses the findings with the development leaders. Depending on the severity of the risks, executive officers, the Provost, or even the President might review the information to make a decision.

Standardising the decision-making process

To support those decisions, the institution uses a decision matrix to standardise the process and ensure consistency. Developed with input from the Diversity, Equity, and Inclusion (DEI) team, the legal team, and others, this matrix guides leadership in evaluating issues based on how well they align with the institution’s values and support the public good while ensuring accountability. The matrix also helps reduce the natural bias common in different teams and perspectives.

How Xapien powers philanthropic due diligence

The research team have used Xapien for nearly a year to run due diligence on gifts of $5 million and above. Xapien generates comprehensive reports in minutes, giving an upfront view of a prospect so not every donor needs a lengthy review process. Xapien scans billions of web pages to gather, disambiguate, and analyse information about a donor. It then summarises the findings in an easy-to-read report using advanced generative AI and anti-hallucination technology. 

Risk flags at the top provide a quick overview, while the report’s web and media section categorises adverse media by risks like fraud or corruption. Previously, open-source research on a donor could take from four hours to two days. Now, Xapien completes this process in as little as 10 minutes, offering deeper and broader insights than ever before.

Time to strengthen your due diligence and risk management process?

For small to medium gifts considered low or medium risk, Xapien provides an upfront risk assessment. If no issues are flagged, you can quickly file and forward the report for senior leadership review. For higher donations or those flagged as higher risk, Xapien reports offer detailed information on the donor’s background and media presence in chronological order. You can filter through different risk categories, such as fraud, corruption, or ESG, to review adverse media Xapien has flagged related to the donor, with each article traceable to its original source.

Xapien helps fundraisering teams and development teams eliminate prospects who aren’t aligned with the organisation’s values or carry too much risk, leading to a more efficient and targeted fundraising pipeline. Talk to our team to see how Xapien can strengthen your philanthropic due diligence process.