While attending the Disaster Recovery Journal Conference in San Diego this week, many people I spoke with, or speakers I listened to, felt that Y2K will cause few, if any, problems in January. A number felt the whole idea is being blown out of proportion. After all, the I.S. departments have been working on this problem for the last year. They have tested their fixes. Therefore, there should not be any problems.

According to a recent article published in the New York Times on February 24, 1999. the U.S. House of Representatives has introduced business-backed legislation that would limit litigation, lawyers’ fees and damages from breakdowns related to the Year 2000 computer problem. The proposal would bar most Y2K claims from Federal courts, unless plaintiffs provided notice to sue within 30 days of a breakdown and gave defendants 90 days to fix the problem. Lawsuits for personal injuries would not be affected, but punitive damages would be capped at $250,000. Lawyers’ fees would be limited to $1,000 an hour. Additionally the bill attempts to protect large companies from responsibility for the actions of less wealthy co-defendants by limiting each defendant’s liability to a direct proportion of its responsibility for breakdowns. The measure encourages mediation and arbitration over lawsuits and establishes a Federal loan program for small businesses that need help fixing their computer systems.

Supporters of the House Bill say the legislation will provide an incentive for companies to fix the problem by protecting businesses and individuals, who make reasonable efforts to prevent failures resulting from this computer glitch. They also feel the legislation will insure that companies focus their resources and efforts on getting computer systems ready for the Year 2000, - not on preparing or defending themselves from lawsuits.

The next week, an article entitled The Economy is Still "at Risk" written by Robert Rankin, a special U.S. Senate committee has warned that all segments of the economy remain "at risk" to some degree from the Y2K problem. The Senate report suggests that:

• While almost all telephone systems are expected to be ready and banks (and ATMs) are expected to keep functioning, a failure of some parts of the electric utility system is likely, - especially with the 1,000 small, rural utilities.

• Small and medium businesses - more than 50% of them have yet to address the problem.

• More than 90% of doctor’s offices have yet to address the problem.

• There is no nationally strategic plan to ensure thatthe critical infrastructures will continue to function. Neither is there a national contingency plan in the event of widespread infrastructure failure.

In prior articles, Senator’s Robert Bennett (R. UT) and Christopher Dodd (D. CT.) have stated that Americans may face widespread, but minimal, disruptions in health care, financial services, food and energy supplies.

Are we underestimating the problem?

I’m very concerned that we might be underestimating the Y2K problem. I agree that there will be some disruptions, but I also feel they may be more damaging than most people believe. Why? I’m getting mixed messages.

Mixed Messages

First, we are being told that I.S. departments have fixed and tested the program changes. Then we are being told that there may be some minor disruptions. Next, we are being told that we should prepare for the Year 2000, as we would a hurricane; e.g., by stocking up on canned food and bottled water in case vital services are cut off.

My concern is that the same type of fixes and tests of program changes were involved in the cut-over of computer systems for three different banks in the Delaware Valley area. These were banks that were merged with, or acquired by, other banks in 1998. In all three cases, the cut-overs have resulted in significant problems for the bank’s customers. I’m sure that after the fixes were made for the migration, the bank’s systems were tested to ensure there would be no problems. Furthermore, I’m sure that they ran the systems parallel as part of the testing process. Yet in all three cases, the banks experienced problems, some minor, some significant, during the cut overs.

Then we have the House legislation mentioned above. If most people in the U.S. are only going to experience minor disruptions, why are we even worrying about lawsuits? They would only be necessary if the disruptions were not minor.

The proposal would bar most Y2K claims from Federal courts, unless plaintiffs provided notice to sue within 30 days of a breakdown and gave defendants 90 days to fix the problem.

Questions - Is a 90 day outage considered minor? How many companies can wait 90 days for the problem to be fixed?

"Supporters of the House Bill say the legislation will provide an incentive for companies to fix the problem by protecting businesses and individuals who make reasonable efforts to prevent failures resulting from the glitch."

That was already accomplished by a bill passed last year.

Last year, Congress approved legislation intended to protect businesses from being sued for statements about Year 2000 preparedness that had been made in good faith, even if they turned out to be false.

"Supporters of the House Bill feel the legislation will insure that companies focus their resources and efforts on getting computer systems ready for the Year 2000, - not on preparing or defending themselves from lawsuits."

The employees working on a company’s Y2K Contingency plan are from revenue generating business units or departments. They are not preparing to defend themselves from lawsuits. The people working on the potential lawsuits are lawyers. Logically they should be preparing to defend the company against lawsuits filed because of Y2K problems. I am unaware of any lawyers who are writing the Contingency Plans for business units.

How does this legislation then benefit anyone but the companies that are not prepared? This doesn’t provide an incentive to fix the problem. It gives businesses an excuse, if the problem isn’t fixed.

How many times have you heard someone say recently "When are people going to be held responsible for their actions?" Here’s another case of people not held responsible for their actions, or their lack of action.

As I mentioned at the conference, there are three phases of a crisis, the pre-crisis phase, the acute crisis phase and the phase. We, as a country, are in the pre-crisis phase. This is the phase that allows us to minimize the affects and avoid the acute-crisis phase. In my next article we’ll analyze the new statements made by companies and political leaders about this crisis.