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Winter Journal

Volume 31, Issue 4

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Industry leaders tend to talk about the Year 2000 crisis as a technical problem that affects businesses throughout the world, with very little attention paid to the human element. But while the problem starts out in the computerized, date-sensitive information systems of companies around the world, the effects will ripple through every community a business touches – its suppliers, its vendors, its customers, and even its employees.

A big part of the problem is the "cascade effect," which means that even if your company has retrofitted all of its systems to be Year 2000-compliant, those you do business with – namely your suppliers and vendors and their suppliers and vendors – may not have. That cascading effect could interrupt your business, or in the worst case, effectively put you out of business.

"Take the manufacturing environment. Manufacturers are dependent on other companies for the supply of goods. Your suppliers may not have a plan to deal with the Year 2000, or their suppliers may not have a plan in place," says Richard Wnek, vice president of risk management engineering services at CIGNA International, a global insurance company headquartered in Philadelphia, PA. "You get down to the level of power supply or order supply of raw materials and if you don’t have those, you can’t make the subcomponents that go into the finished product. There is a tremendous interdependency."

At its core, the Year 2000 crisis is a unique computer problem. But ultimately, the cascade effect makes it a human problem. The cascade effect trickles down to the bottom of the food chain – a family in middle America that cannot live without electricity or heat, or an employee whose job is eliminated because her department’s systems were not deemed important enough to fix. Even with a comprehensive continuity plan, the human element can have a tremendous effect on the implementation of that plan during a crisis. In the immediate aftermath of Hurricane Andrew, for example, companies quickly learned that there was no one to implement disaster recovery plans – most people stayed home to care for their families. The same thing could conceivably happen when the Y2K disaster strikes. "You may have a good contingency plan for how your business will operate, but people need to take care of their families first," Wnek says. "If they don’t have electricity or heat, they may not be there to do their jobs. So there may be some businesses that will fail because people will be taking care of food, shelter and the well being of their family. Employees have to feel that their families are safe. If not, they are not likely to come to work."

Although industry generally discounts the "human effect" of Year 2000, it is a reality, and a moral obligation that companies should shoulder, says Dr. Ed Yardeni, chief economist of Deutsche Bank Securities in New York. "Communities need leadership, and who better to lead than companies? Companies rely on the same services households rely on. They need electricity, phone service, water service and sanitation. We all need each other to really reveal the extent to which we are having problems. "Some believe there isn’t much that can be done at this late date to mitigate the human effect. But companies should recognize that a problem exists, and then address the problem as part of the business plan," Wnek says.

To plan effectively for the Year 2000 crisis and all it could entail, we must face all facets of the problem head-on – including the human effect. Take off the blinders and think diagonally instead of vertically or horizontally, and identify all the different ways your organization can be affected by the absence of key personnel or the collapse of other companies who are critical to the completion of your mission. Remember that your company does not exist in a vacuum – the preparedness or lack thereof of other companies could have a lasting effect on your business. For example, if planes are not flying, your raw materials do not arrive as scheduled, and you lose customers to the competition because your product is not ready.

Be prepared to modify how you do business for several years – remember that any Year 2000-related failures will probably last much longer than a day or two. You are looking at a full-blown disaster for your organization and those you impact unless you are prepared on all fronts and help those you interact with on a daily basis prepare as well.

Some companies are, in fact, doing their part. "I’ve seen some companies that are very alarmed about it and are reaching out to their employees and communities to try to work together," Yardeni says. "I visited a utility company in the Midwest recently, and its management had a very credible outreach program to their customers and vendors."

Legal Impediments

But just because a select few are shouldering their moral responsibilities, that doesn’t mean the rest are following suit. In fact, companies who are going to great lengths to help the bottom of the food chain are few and far between.

Up until now, legal impediments, whether real or anticipated, have had the effect of hindering information exchange on Y2K problems and solutions. Recent passage of the Year 2000 Information Readiness and Disclosure Act should make it easier for companies to disclose Y2K information and should ultimately make continuity planning for this particular crisis more effective.


 
 Michael Braham is a Vice Chair of the Private and Public Businesses International Board of Directors. He is also the Director of CommGuard, Enterprise-Wide Continuity Services at Bell Atlantic Federal Systems. Braham serves on the National Board of Directors of the Association of Contingency Planners and is Sub-Committee Chair for the Leadership Coalition for Global Business Protection.