In this post, Nicholas Duvall, Research Development Officer, Science and Engineering, explains the due diligence process for research proposals with an international component, and how the Research Support Office helps with this.
‘Diligence is the mother of good fortune, and idleness, its opposite, never led to good intention’s goal.’ Miguel de Cervantes, Don Quixote
What was true for Don Quixote is also true for research. Performing adequate and proportionate checks when putting together a research proposal, known as due diligence, is crucial to managing risk, and can help researchers deliver the right outcomes. This blog looks at why this is important (particularly where a project has an overseas component), what it entails, and how the Research Support Office (RSO) can help carry out these checks.
What is due diligence, and why do we do it?
Due diligence refers to a series of checks which an organisation will perform before entering into a contract with another party. This is done to assess whether that party will be able to fulfil their obligations, and whether there are particular risks involved in working with them. It looks at factors such as their financial position, their procedures for dealing with (and hopefully preventing) any mishaps, and whether they are a reputable organisation. In the context of academic research, these parties include collaborating universities, industry partners and suppliers, and NGOs.
Risks in international collaborative research can be very real. In the Transparency International Corruption Perceptions Index, two-thirds of countries score less than 50 out of a possible 100, indicating an endemic level of public-sector corruption. Being diligent when we form partnerships ensures that research funding, much of which is designated overseas aid, is used for its intended purpose, and not misappropriated.
The information gathered through due diligence can guide your decision-making as you plan your project. It can affect important things such as how project funds are distributed, or what ground rules for the project will be set. You may have to make payments to collaborators in advance if they would struggle with payment in arrears (but otherwise are capable of delivering their required outputs). If they don’t have suitable policies of their own, you can ask them to sign up to some of the University of Edinburgh’s for the project’s duration. Occasionally, the checks will lead you to conclude that a prospective partner isn’t suitable after all, because working with them would represent an unacceptable level of risk. It is therefore important that the process is done early, ideally at the application stage, in case you need to revise your project’s structure, or find a different partner to work with. Depending on the importance of the partnership, making a fundamental change might be very difficult once the project has been awarded. , a satisfactory outcome after robust checks can form the foundation of a confident partnership.
UK Research and Innovation (UKRI) requires us to perform some due diligence checks on all overseas organisations involved in projects they fund, when we are the lead organisation. How deep we delve depends on the level of risk involved in the project, but we need to record what we do, because UKRI will ask to see what due diligence checks we have done. For the reasons outlined above, it is advisable to have most of this complete by the time an application is submitted, and for some calls, such as those funded from the Global Challenges Research Fund, we need to do it before the application is submitted.
Such a short timescale, and the emphasis on compliance, can be daunting (and that’s setting aside all the other pressures of preparing a competitive research proposal). However, RSO colleagues are on hand to help.
What does the Research Support Office do?
We are responsible for conducting due diligence on overseas research organisations (Edinburgh Innovations does due diligence on industry partners). It is vital that you get in touch with your Research Support Adviser as soon as possible when your proposal includes funding going to an overseas organisation, so we can put the process in motion (though if the University has worked with the institution before, the checks may already have been carried out).
There are different levels of due diligence checks ranging from a light-touch process, to a full financial and governance audit. We might look at any past dealings the University has had with the organisation. Did the partnership work well? Often the researcher’s experience of working with the organisation, or colleagues within it, is a key element in gauging risk.
If certain risks are present, such as a high level of corruption in the partner’s country, more detailed checks must be performed. Our main tool for this is a questionnaire, based on a UKRI template, which your Research Support Adviser sends to an authorised person within the partner organisation to complete and sign. Most of the questions are standard for research organisations. In fact, the University of Edinburgh regularly complies with similar requests from other overseas institutions – we do this for all our US funding, for example. Your Research Support Adviser can help and guide the partner if they need advice on interpreting the legal or governance behind the form.
What information we look for is guided by UKRI’s three pillars of due diligence:
- Governance and Control: are there procedures to prevent and investigate fraud, corruption, modern slavery and scientific misconduct? How do they manage risk? Is there a robust ethics policy?
- Ability to Deliver: has the collaborator the infrastructure to carry out the research? How are research projects and outputs managed and monitored? Are research data managed and stored securely?
- Financial Stability: is the collaborating institution financially viable? How are its accounts audited, and which accounting system is used? Are research funds held in separate accounts?
Sometimes, risk can be mitigated quite easily. If the partner lacks certain policies, the University of Edinburgh’s can substitute, and that will be incorporated within any legal agreement we enter into with them. But some hazards, such as potential compliance shortcomings, will need to be evaluated at school, college or university level. There is more information on what kind of risks we, as an institution, will and will not accept in the Risk Policy and Risk Appetite document.
We handle a lot of due diligence requests in the Research Support Office. Research Support Advisers are very experienced and waiting to hear from you. It is not something to be worried by, and it should not put you off partnering with overseas researchers, but rather give you full confidence that you have laid the foundations for a fruitful partnership.
Dr Nicholas Duvall is Research Development Officer for Science and Engineering.