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Ignore
the Year 2000 Millennium Bug at your peril. It has been estimated
that it could cost governments and industry worldwide a trillion dollars
to fix it. And small business owners who are not preparing to deal
with it now, could face ruin.
The
Year 2000 problem (Y2K) is the biggest challenge on the horizon for
the global economy, according to Ian Campbell, parliamentary secretary
to the Minister for Communications, Information Technology and the
Arts.
The
problem, says Campbell, is that we don't know how big the problem
will be! But many big businesses have invested huge amounts of money
in hiring whole divisions of people to work solely on the Y2K issue.
The Commonwealth Bank has budgeted $115 million for its Y2K program,
which will allow for contingencies. And it is estimated that by January
1, 2000, governments and industry worldwide will have spent nearly
a trillion dollars on fixing it.
Bite The Bullet
Some
43% of businesses admitted in a recent ABS survey that they haven't
taken action on Y2K yet. "Time is running our for business to ensure
all their date-dependent computer systems and other devices are Year
2000 ready..
"I urge
all businesses to bite the bullet immediately," says Ken Pritchard,
project director of the Millennium Program at the Commonwealth Bank.
A lot of businesses will go under, particularly smaller businesses,
because they haven't addressed the issue. Having a policy of 'fix
on failure' won't work this time. Individual computers are not the
problem, it's the fact that every computer across the world could
break down at the same time.
Computer
chips are embedded in just about everything we use in day-to-day living
and their failure may cause critical systems to fail. The world is
so reliant on interdependent networks that two thirds of businesses
in the world are expected to have 'mission critical failures' as a
result of Y2K.
Businesses
could be without a critical spare part for months. They may not even
be able to get their telephone to work. Think about the building you
are in. Will the lifts work? What about the switchboard and the air
conditioning? There is only a finite number of people who will be
able to work on fixing all these problems.
"Don't
think you've got to head for the hills," says Bill Aronson, managing
director 2000aware.com. "Australians are more likely to go to the
beach! It's not going to be like a heart attack, more like multiple
sclerosis, with a series of disruptions expected from April this year
(when some countries' begin their 1999/2000 financial year) and building
steam in July.
"There
are lots of scare stories around. But if you are informed and deal
with the issue, you might even be able to make a profit from this
problem," Aronson says.
Making Plans
"It's
critical that every business and individual has a contingency plan,"
says Chris Gilbey, business consultant and author of 'How to Survive
the Y2K Crisis in Australia' (Bantam, 1999). "We all have to plan
for the worst and hope for the best. If governments and big business
are taking precautions, then small businesses must as well. You need
to take an organised approach to what your business will do in the
event of a significant utility failure or other problems that will
affect your operations."
According
to Noel Pettersen, chief executive of the National Insurance Brokers
Association of Australia (NIBA), Y2K is a "known and foreseeable event",
meaning it is not insurable. Insurers are encouraging businesses to
take a risk management approach and to do all they can to prepare
for and prevent losses instead.
It is
possible, although difficult, to get insurance cover for Y2K. Businesses
would have to accept a combination of conditions such as a higher
deductible, maximum claim limits, or may have to undergo a wide-ranging
and expensive audit process. Unless specially negotiated, few types
of insurance will provide any protection for Y2K disasters.
According to Gilbey, businesses should:
- Gather
all the critical paperwork that might be required as proof of identification
or transaction if data is destroyed or corrupted.
- Keep
records of bank statements so you can prove your bank balance tallies
with the first statement of the year.
- Insist
on hard copies of data information such as share transactions.
- Check
the Y2K compliance of all your suppliers.
- Stockpile
inventory that could be critical to your business' continuity.
You should anticipate failure and disruption to your supply chain
that is beyond your control. "If, for example, you source fabric from
Indonesia, how can you find out and be confident that the factory
and the shipping process will be trouble free?" Gilbey asks.
Australia,
the UK and US, are leading the world in Y2K compliance. But we are
dependent for imports from countries that have been identified as
being as far behind as it is possible to be. These include Indonesia,
Korea, China, most of Africa and South America, and the former Soviet
Union.
Beyond The Square
The
Y2K situation is expected to create a dramatic change in economic
circumstances. There will be a lot of people chasing scarce supplies.
According to Aronson, businesses should plan for sudden expansion.
"If suddenly one of your competitors goes out of business, then you
have to be prepared to take up their customers," he says. "The winners
will be businesses that are flexible."
Aronson
predicts a change in corporate culture as a result of this crisis.
Companies that address the psychological impact of the Y2K issue will
build loyalty among their staff. He forecasts a swing away from treating
employees as economic numbers and a move to taking care of them.
The
GartnerGroup advocates that people stockpile food, water, at least
two weeks' salary in cash and essential pharmaceuticals for the predicted
one to two weeks of chaos expected in early January 2000. According
to Aronson, businesses should use their logistical resources and buying
power to stockpile essential supplies in their warehouse for their
employees. In return, these employees are more likely to assist their
company if, for example, it should require more employees temporarily
during the crisis.
Take Responsibility
Many
company directors seem to be unaware of their personal liability in
addressing the Y2K issue. According to Pettersen, of the NIBA, Y2K
may be the most serious potential liability most Australian company
directors will ever face in their professional lives.
"Every
director knows that the Millennium Bug will strike," says Jim Brown,
principal for enterprise transformation at James Martin & Co. "What
many don't appear to be doing is protecting their companies and themselves
from questions and attacks from shareholders, regulators, suppliers
and disgruntled customers.
"If
they don't prepare effective and legally sustainable business continuity
plans they may not discover their personal liabilities until the first
writs arrive, some time in the first quarter of the year 2000.
"The
two questions every director will be asked are: Did you personally
take all due care to ensure that the Millennium Bug would not damage
your business? And can you prove it?"
Business
continuity planning is top-down and takes into account all the risks
that might impact on the business. For example a car importer might
anticipate problems in shipping, customs, transportation and manufacturing
during Y2K. They would need to assess the impact of all these potential
factors on the business and plan ways to continue serving their customers
if their supply chain was disrupted.
Y2K Information & Resources
- Government
Information
Freecall 1800 11 2000
Internet: www.Y2K.gov.au
www.ogit.gov.au
- Institution
of Engineers, Australia/Commonwealth Bank Y2K Directory
www.ieaust.org.au. A free database of some 200 Y2K engineer consultants
and other information about Y2K
- www.2000Aware.com.au
Industry information and
In
your bookshop:
- 'How
to Survive the Y2K Crisis in Australia' by Chris Gilbey
Published by Bantam February 1999
RRP: $17.95
Software
& other tools:
- Year
2000 Assessment System
THP Computer Services
1300 369 209
This complete
business assessment solution includes audit tests of computer hardware
and software and other business systems, a comprehensive, easy to follow
workbook, a compliance report prepared by qualified engineers, as well
as helpdesk support.
Cost:
$595
- Check
2000 software
Greenwich Mean Time website www.gmt-2000.com.au
Ph: 03 9387 0311
- Prove
It
Ph: 02 9388 3126
Getting Started
1.
Review your business and list all items, suppliers and key customers
that need to be investigated or acted upon.
2.
Develop a plan to address the items on your list.
3.
Fix and test the identified items.
4.
Develop contingency plans to guard against possible system, supplier
or customer failure.
5.
Talk to your bank if you need finance to be Year 2000 ready.
Source: the Commonwealth Bank.
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