Y2K News in Brief
Return to the Y2K Risk Assessment Task Force web site
With only a little over a year
remaining until the turn of the
century, much must still be
accomplished to avert a Y2K
computer crisis. The following is a
summary of the most current Y2K
developments.
The impact of Y2K will grow in the
weeks ahead. On Jan. 1, 1999,
corporate and government computer
programs begin making one-year
calculations and projections that for
the first time will reach the year 2000. John Koskinen, who heads the
President's Council on Year 2000 Conversion, fears that if no significant
glitches occur Jan. 1, there will be a reverse awareness trend. Small to
medium-size companies may then dismiss Y2K as hype and hysteria and
cancel costly repairs a year before the big problems are likely to occur.
U.S. Government
In the sixth quarterly report filed by all government agencies to the
President's Council on Year 2000 Conversion, nine agencies (VA,
EPA, FEMA, GSA, NASA, NRC, NSF, SBA, SSA) were 74%
compliant; eight (USDA, DOC, HUD, DOI, DOL, DOJ, Treasury,
OPM) were 56% compliant; seven (DOD, Education, DOE, HHS,
DOS, DOT, AID) only 42% ready. Overall, 24 major agencies were
50% compliant.
Of the 24 federal agencies required to file quarterly or monthly Y2K
progress reports, 13 have reported concerns about computer staffing.
Some 55,000 IT employees work for the federal government. The best
among them are constantly lured by the private sector at three or four
times their government salary plus signing bonuses. In some
agencies there is a 30% turnover rate vs. 7% in a normal year. Under
government mobilization plans, agencies are bringing retirees back to
work without the required reduction in salary or military annuity.
The U.S. government has taken decisive action to ensure that
businesses and government agencies have an adequate supply of
Y2K workers. The House voted to raise the H1-B visa cap to 115,000
for the 1998/99 fiscal year. The quota will remain high until 2002
when it will drop back to its original level of 65,000. A foreign national
with an H1-B can work in the U.S. for three years: an employer can
request an extension for three additional years. To qualify for an H1-B
visa, a person must fulfill the following requirements: 1) work in a
specialized field; 2) have a college degree; and 3) have an offer of
employment from an American company.
U.S. Banking
At an economic symposium in Houston in late October, Fed governor
Edward Kelley played down the possibility that Y2K problems could
push the U.S. into deep recession, but he acknowledged there will be
some impact on the U.S. economy. He said, "uncertainty about the
ultimate effectiveness of Y2K remediation programs already is
affecting corporate investment and production plans and obviously will
be with us at least until January 2000."
A survey by Weiss Ratings, Inc., which bills itself as the U.S.
consumer advocate for financial safety, found that 12% (about 1,300)
of U.S. commercial banks and savings and loans are behind
schedule in preparing their computers for 2000.
The Securities and Exchange Commission (SEC) and the National
Association of Securities Dealers have charged 96 brokerage firms
with failing to file reports on the actions they are taking to head off
Y2K problems in their networks. 56 of these firms have agreed
collectively to pay $335,000 to settle charges that they failed to
supply information as required by SEC rules.
Litigation and Liability
Possibly more than 50% of top corporate executives and officers are
at some risk of Y2K-related law suits, according to Capers Jones,
Chairman of Software Productivity Research Inc. an internationally
recognized Y2K expert. Current data indicates about a 55%
probability of lawsuits for executives who fail to take action against
the Year 2000 problem. Conversely, there is only a 5% probability of
litigation against executives who do take Y2K remediation action.
The safest course is to take action to achieve Year 2000 compliance.
But remarkably few small to medium sized businesses are taking
such action.
Private Citizens
Half of all Americans are concerned about the Year 2000 (Y2K)
computer problem, according to a poll by CIO Communications, Inc.,
a computer research company. Their main worry is a possible
disruption of financial services, followed by what they believe will be a
breakdown of government services.
The Cassandra Project, a non-profit group formed to bring attention to
Y2K, reports that more than 100 grassroots organizations have been
created in the U.S. because of concern about the consequences of a
global Y2K crisis. Most of them recommend stocking canned food
and bottled water, much the way households carry fire insurance.
How does an individual find out whether home or office PCS are Y2K
compliant? First, beware of Internet scam artists making wild claims
and selling snake oil. Secondly, go directly to the PC's
manufacturer's World Wide Web site where you will find a Year 2000
compliance chart. There you will be told your system is compliant —
or be given instructions on what to do. Thirdly, if the system is old
and/or the manufacturer is out of business, a hardware upgrade is
probably your best bet.
At home, anything that plugs into the wall — fax machines,
microwave ovens, vacuum cleaners, refrigerators — should be
checked with the manufacturers web site. Do not wait for Jan. 1,
2000 to see if the product warranty is still valid.
International
According to a survey by Cap Gemini released in early November,
the estimated cost of solving the Y2K problem in the U.S. and in
Europe has risen 20% over the past six months and now stands at
$508 billion. The survey also urges governments to dedicate their
efforts on those computer systems that drive essential services
rather than a broad-based approach to assessing the problem.
The Gartner Group's report on the countries most prepared for the
Year 2000 computer problem ranks the U.S. in first place, followed
by Canada, Australia, South Africa and Israel. The U.K.'s previous
no. 2 position behind the U.S. has slipped to sixth place, but still well
ahead of Germany, France, Italy and Japan.
The responses to surveys sent to the 185 members of the
International Civil Aviation Authority have been "spotty" and "evasive."
KLM (Royal Dutch Airline) has already announced that it will not fly
to airports in countries that are deemed non-compliant. Nor will KLM
accept flights from these countries to the Netherlands. The UK is
considering a ban on some airlines, mostly from developing
countries.
China is playing catch up. Its problems are compounded by the
widespread use of pirated and specially designed software that do
not respond to off-the-shelf corrective programs. Chinese authorities
are making vague threats about holding organizations "criminally
responsible" for any Y2K failures. The Central Bank is providing loans
for reprogramming computers, but a dearth of technical know-how
has raised serious doubts about whether China will be anywhere near
ready. China has some 10 million computers. According to Merrill
Lynch, few Chinese industries are taking the initiative in remediation.
Glitches in billing and shipping will impact foreign trade to some
degree. A major Y2K crisis in China could affect much of the region.
Sergey Rogov, a prominent member of the Russian Academy of
Sciences, says 80% of Russia's systems are Y2K sensitive — and
there is no remediation plan in place and no money available for
remediation. It was not until May 23 this year that Russians were told
there was a Y2K problem. Then Prime Minister Kiriyenko gave the
government three months to come up with a Y2K plan. Three months
later, Kiriyenko was fired — and no plan was produced. Russia's
Atomic Energy Ministry spokesman said, "We don't have any
problems yet. We'll deal with the problem in the Year 2000 when it
happens."
EU
European governments and public sector organizations have only
spent between 5 and 10 percent of what is needed for Y2K fixes,
according to a Gartner Group report. The U.S. research organization
said European "hospitals, government procurement, defense
procurement and welfare are areas where there will be disruptions
from the end of this year. The Dutch, Swedes, and Irish have done a
good job, but very few European governments can stand up to
scrutiny. They have been saying a lot, but not really doing much."
The conversion of 11 EU national currencies to a single "Euro"
currency at the beginning of 1999 and Y2K fixes at the same time
"will cause massive business disruption and dislocation," according
to another Gartner survey. There is also a chronic IT labor shortage in
Europe. "Euro" conversion costs are estimated at approximately
$100 billion; Y2K fixes, somewhat higher.
Troops could be called onto the streets to quell civil emergencies
caused by the millennium bug, according to a leaked UK Cabinet
letter. Donald Dewar, Secretary of State for Scotland, warned his
cabinet colleague George Robertson, the Defense Secretary, that
planned cuts in the volunteer Territorial Army could leave the country
unprepared for any civil emergencies caused by computer failures at
the end of 1999. The letter is by far the most graphic warning from a
senior minister of the dangers posed by Y2K: "This could well leave
the country open to criticism over a reduction of emergency
preparedness at a time when millennium bug problems pose a threat
to key services such as electricity and telecommunications, and
when therefore, emergency preparedness should be enhanced."
Margaret Beckett, Leader of the House of Commons and the minister
in charge of Y2K remediation, responded by saying, "This
government's top priority has always been the safe and secure
supply of essential services. It will remain so." Ms. Beckett had said
previously, somewhat reluctantly as she put it, that the Y2K focus
had shifted from overall remediation to prioritization and contingency
planning.
International Banking
Anticipating a run on cash by people living in fear of a Y2K crisis, the
Bank of Canada is the latest central bank to announce it will be
printing extra bank notes...The Bank of England issued a similar
advisory in October...In New Zealand, the Reserve Bank said it will
keep old bank notes — which are due to be replaced in 1999 by
flexible plastic ones — in vaults instead of destroying them to ensure
sufficient cash on hand...The U.S. Federal Reserve Board was the
first to announce a Y2K contingency plan. The Fed usually keeps
$150 billion in cash reserves. By next summer it will raise the
amount to $200 billion. There is a total of $460 billion in circulation —
about $100 billion in the U.S., the rest abroad.
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