As the year 2000 draws closer, Y2K awareness is elevating and concern is increasing.
The Y2K "bug" is more than just a domestic issue, and we should anticipate the global effects of the problem and what action businesses can take to reduce exposure.People in many countries are confused and uncertain as to the real impact of the Y2K bug. Is it a non-issue, a potential perception-induced crisis, a manageable programming inconvenience or a pending major technology catastrophe? These questions have the world looking to the United States for leadership. With the exception of Utah's Sen. Bob Bennett and a handful of consulting agencies, necessary leadership has been slow in developing, resulting in further global uncertainty.
The reality is that there is substance to this issue. The U.S. Office of Management and Budget estimates that the cost to rid federal systems of the bug will be $4.7 billion. The Federal Reserve has begun to print an extra $50 billion in cash to have on hand in case of Y2K problems. In the private sector, companies such as Ford Motor and AT&T have spent hundreds of millions in Y2K preparation. The insurance industry has received coverage exemption in 49 of the 50 states on any claim that has a Y2K cause. Members of our legal community anticipate thousands of claims.
Consider the Y2K readiness of the rest of the world. While it is apparent that the United States, the United Kingdom, former Commonwealth countries, as well as some European nations are making progress, many of our key global trading partners are lagging seriously. Major industrial countries such as Japan and Germany have been slow to respond to the issue. Many other countries currently struggling with economic challenges are least prepared.
Premier Vincent Siew of Taiwan, a country at only 30 percent preparedness, stated that if not handled properly, "the impact of the Y2K problem may be more fearsome than the financial crisis ravaging the global economy now." Countries that do not prepare sufficiently may experience failure rates as high as 5 percent to 15 percent in operations that are computer-date sensitive.
The United States and international partners will feel the impact in similar sectors: utilities, banking, transportation, communications, government and manufacturing. The U.S. economy is connected in a global maze of transnational supply and distribution networks. In today's world marketplace the number of potential Y2K disruptions is unsettling. Inaccurately calculated interest rates and currency exchange could adversely affect cross-border currency movement. Delays in shipping, train and trucking services could leave products on the docks. Breakdowns in communication services from either software or embedded chip malfunctions could prove highly disruptive.
It is important to remember that people around the world created this problem and are capable of dealing with it. How this situation is approached may be as critical as the problem itself. The following steps could be beneficial for Utah companies: First, set up a Y2K team, including management and technicians, to minimize Y2K causes and effects. Second, develop an understanding of the problem, primarily found in legacy programs and embedded chips.
Third, devise a Y2K contingency plan with prevention as a priority. Evaluate your company's global vulnerability, including suppliers worldwide. Review insurance to verify coverage. Consult with legal advisers on ways to anticipate and arbitrate issues that may arise from Y2K. Fourth, implement and test solutions and encourage your global network to do the same.
Fifth, keep customers informed to ensure they have accurate and current information. Companies that are actively engaged globally in solving and containing Y2K problems can minimize potential negative impacts in the coming months.
Dan Mabey is director for the International Business Development office for the state of Utah.