BEHIND THE YEAR 2000 MYTH (Industrial Computing Magazine)
Consider, in light of the following, the likely fate of any business that ignores or leaves the year 2000 problem to management information system (MIS) and plant engineers:
Customers at the top of the automotive and pharmaceutical industry supply chains are already requiring their suppliers to certify year 2000 compliance on the factory floor as well as in their information systems. But whether or not a customer explicitly imposes such conditions, suppliers that can't provide goods or services due to year 2000 problems experienced in computers or automated equipment-or by their own suppliers-will be in breach of contract.
Banks, prodded by federal regulators, are beginning to include year 2000 compliance criteria in assessing borrowers' creditworthiness. Some lenders are even making year 2000 compliance a condition of issuing loans.
Many insurers are beginning to exclude year-2000-based claims from newly issued or renewed business interruption, general liability, errors and omissions liability, and director and officer liability policies.
Members of the "Big Six" accounting firms predict that beginning in 1998, due to companies' unaddressed year 2000 problems, auditors will be unable to give "clean" opinions on such companies' financial statements. This will likely result in loan defaults by affected borrowers and claims by shareholders of "securities fraud" if a company whose financial statements have been "qualified" didn't previously disclose the likely impact of year 2000 problems on its business, finances, and operations.
Accounting rules issued last year unambiguously require companies to deduct the costs of year 2000 remediation from their earnings-in full-in the year incurred (which for most companies will be 1998 and 1999). "Bunching" of such large expenses in only two fiscalyears may depress the stock prices of affected public companies. Also because of this, even private companies will only be able to pay their shareholders greatly reduced dividends, if any.
Since wastewater and sewage treatment facilities are highly automated and environmental emissions monitoring and control systems depend on year-2000-vulnerable embedded controls, malfunctions due to year 2000 problems could lead to polluting releases and emissions, which could then lead to both criminal and civil violations of the environmental laws, litigation, and large fines.
Manufacturers of products that contain embedded microprocessors and microcontrollers that malfunction due to year 2000 problems will face product liability claims if the malfunctions result in property damage or personal injuries. Earlier this year, the U.S. Food and Drug Administration (FDA) informed medical device manufacturers that in order to obtain FDA approval for selling new medical devices to the public, they must demonstrate year 2000 compliance of all software and embedded technology contained in those devices. The FDA has also asked medical device manufacturers to determine whether any products
already in use pose any threat to public health or safety due to year 2000 problems.
Directors and senior management of companies endangered by year 2000 problems themselves risk personal liability for successful claims by unhappy shareholders. And senior management and directors that leave the year 2000 problem to be dealt with by MIS and plant engineers will be particularly vulnerable to claims that they breached their fiduciary "duty of care."
Still think it's just a "technical" problem for MIS and the engineers? If not, then here's what your business should do: MORE.........
isa.org
Industrial Computing Magazine Oct '97 |
