' This is another important paper from CSIS, note these two
paragraphs:
>
With the widespread adoption of just-in-time inventory control
systems and global manufacturing operations, the health of
businesses and economies is increasingly reliant on the timely
import and export of raw materials, intermediate goods, and
finished products. From shipping facilities, to global navigation
satellites, air traffic control, and customs facilities, the
smooth-functioning of international trade is dependent upon
computer systems and embedded chips. Disruptions in supply lines
can quickly shut down entire manufacturing operations.
>
The focus for governments and private sector companies should
shift from readiness to survivability. Disruptions and even
failures are inevitable. Moving beyond even the so-called
"mission critical systems," executives must look at what is
essential to keeping the government or the business operational
at a very basic level. Without credible leadership, effective
contingency planning becomes difficult to achieve.
--Roleigh
(important excerpts follow)
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csis.org
CSIS Y2K Watch
(Center for Strategic and International Studies)
October 7, 1998
Will Y2K Lead to a Global Flight to Quality?
Return to the Y2K Risk Assessment Task Force web site
Y2K Risk Assessment Task Force:
Chairman: Sam Nunn, former U.S. Senator
Vice Chairmen: Bradley D. Belt, Director, International Finance
and Economic Policy
Arnaud de Borchgrave, Director, Global Organized Crime
William Garrison, Director, International Communications
While there is growing awareness of the threats posed by the
so-called millennium bug, most of the focus has been on the
prospects of Y2K-related system failures on January 1, 2000. What
is little understood, however, is the extent to which
anticipation of such failures could fuel a worldwide flight to
quality and exacerbate instability in international financial
markets within the next three to six months.
This is just one of the conclusions that emerged from
off-the-record and public panel discussions with top public and
private sector officials of the CSIS Y2K Risk Assessment Task
Force, chaired by former U.S. Senator Sam Nunn. Key issues raised
in the task force meetings on the global dimensions of the Y2K
threat:
Y2K is not just a January 1, 2000 problem.
The problem will not arrive as the clock strikes midnight on
December 31, 1999. Nor does it end the following day. There
already have been a few Y2K problems in applications that look
beyond the turn of the century. The pace of Y2K failures likely
will increase after January 1, 1999, with the beginning of fiscal
years that extend into the year 2000.
In addition, increasingly companies will begin to reevaluate
their relationships with vendors that can not provide assurances
of compliance. Financial institutions will beginning to terminate
counterparty relationships with non-compliant firms. This will
happen sooner rather than later - over the next three to six
months. And, according to Senator Bob Bennett, who chairs the
Senate special committee on the Y2K problem, "it will be with us
two to three years after January 1, 2000," due to knock-on
effects and a tidal wave of lawsuits.
Y2K could disrupt global financial and trading systems.
Financial markets are the central nervous system of the global
economy; a vast, complex network of linkages among corporations,
financial institutions, exchanges, regulators, depositories, and
clearing firms. Not only is the international financial system
heavily reliant on computer hardware and software applications
for core operations, it is also dependent on continuous,
real-time information flows. Failures in telecommunications or
power networks could disrupt information and capital flows at
critical junctures.
While major U.S. financial institutions and exchanges have begun
testing their systems and are likely to be Y2K compliant, there
is increasing apprehension that institutions in key emerging
markets, and even some developed markets, are not giving
sufficient attention to potential Y2K problems. Indications are
that financial institutions already are assessing Y2K
counterparty risk and will begin to terminate relationships with
firms that they do not believe will be Y2K-compliant. Entire
markets could be effectively blacklisted. This "flight to
quality" could aggravate an already fragile situation in global
financial markets, possibly leading to a Y2K-fueled liquidity
crisis. "It is a mistake to believe we may fall off the cliff on
January 1, 2000, but that nothing bad will happen until then."
Similar concerns exist with regard to global commercial
relationships. Interconnectivity problems present one of the
greatest concerns. Merely achieving compliance in one's own
company is not sufficient. Complex upstream and downstream
linkages exist among suppliers, vendors, service providers, and
customers, with large multinational companies typically having
tens of thousands of relationships.
With the widespread adoption of just-in-time inventory control
systems and global manufacturing operations, the health of
businesses and economies is increasingly reliant on the timely
import and export of raw materials, intermediate goods, and
finished products. From shipping facilities, to global navigation
satellites, air traffic control, and customs facilities, the
smooth-functioning of international trade is dependent upon
computer systems and embedded chips. Disruptions in supply lines
can quickly shut down entire manufacturing operations.
[snip]
Contingency planning is critical.
It is clear that not every mission critical system around the
world will be compliant by the year 2000. It is imperative, then,
that public and private sectors alike begin the contingency
planning phase.
The focus for governments and private sector companies should
shift from readiness to survivability. Disruptions and even
failures are inevitable. Moving beyond even the so-called
"mission critical systems," executives must look at what is
essential to keeping the government or the business operational
at a very basic level. Without credible leadership, effective
contingency planning becomes difficult to achieve.
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Roleigh Martin ourworld.compuserve.com
( easy to remember alias is: webalias.com ) |
