Due diligence and Dunning-Kruger effect: Difference between pages

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1. ''Risk management.''
''Behavioural economics''.


(DD).
The Dunning-Kruger effect is generally reported as an irrational tendency among certain incompetent individuals systematically to ''overestimate'' their true level of competence.


The process of detailed investigation and verification of key information by a prospective investor or their representative.
In simple terms, this aspect of the Dunning-Kruger effect is the reverse of the [[Impostor syndrome]].


A possible explanation for the Dunning-Kruger effect is that the skills we need to assess our level of competence in a given task correctly, are exactly the same skills that we need to perform the task itself.  Those lacking in the task 'performance' skills would then, necessarily, lack the 'competence assessment' skills as well.


2. ''Risk management - money laundering.''
The Dunning-Kruger effect can however be 'cured', with even a relatively moderate amount of appropriate training.


The verification of a prospective customer's identity and the nature of their business, for the purposes of preventing money laundering.


Also known as ''customer due diligence''.
Such tendencies to assess evidence incorrectly are known collectively as 'cognitive biases'. Affinity bias is another example.




== See also ==
The Dunning-Kruger effect is strictly defined more broadly, to ''include'' the Impostor syndrome (underconfidence of skilled people) as well as the effect described above (overconfidence of the unskilled).
* [[Audit]]
* [[Bring down call]]
* [[Data room]]
* [[Mandatory human rights due diligence]]
* [[Money laundering]]
* [[Non-disclosure agreement]]
* [[P2P]]
* [[Prospectus]]
* [[Risk management]]
* [[Seed]]
* [[Series A]]
* [[Series B]]




== Other resource ==
== See also ==
 
* [[Affinity bias]]
[[Media:2015_03_Mar_-_Squeaky_clean.pdf| Squeaky Clean, The Treasurer, 2015]]
* [[Behavioural economics]]
* [[Cognitive bias]]
* [[Emotional intelligence]]
* [[Impostor syndrome]]


[[Category:Long_term_funding]]
[[Category:Working_effectively_with_others]]
[[Category:Compliance_and_audit]]
[[Category:Corporate_finance]]
[[Category:Ethics]]
[[Category:Manage_risks]]
[[Category:Risk_frameworks]]
[[Category:Risk_frameworks]]

Revision as of 14:52, 2 April 2021

Behavioural economics.

The Dunning-Kruger effect is generally reported as an irrational tendency among certain incompetent individuals systematically to overestimate their true level of competence.

In simple terms, this aspect of the Dunning-Kruger effect is the reverse of the Impostor syndrome.

A possible explanation for the Dunning-Kruger effect is that the skills we need to assess our level of competence in a given task correctly, are exactly the same skills that we need to perform the task itself. Those lacking in the task 'performance' skills would then, necessarily, lack the 'competence assessment' skills as well.

The Dunning-Kruger effect can however be 'cured', with even a relatively moderate amount of appropriate training.


Such tendencies to assess evidence incorrectly are known collectively as 'cognitive biases'. Affinity bias is another example.


The Dunning-Kruger effect is strictly defined more broadly, to include the Impostor syndrome (underconfidence of skilled people) as well as the effect described above (overconfidence of the unskilled).


See also