State Controller Kathleen Connell yesterday released a report by her office raising concern that Y2K noncompliance by the state's small and medium-sized companies may cause "severe negative financial repercussions."
"While many California companies are well on their way to attaining Y2K compliance, we must beware of the weak links, whose failure could have a choking effect on the state's commerce," said Connell, at a symposium held at the headquarters of database software firm Oracle.
Connell noted that surveys suggest that as many as 50 percent of the nation's data processing organizations' will not have made their software Y2K-compliant by 2000.
Her warnings came a day before a senior federal banking official said the Y2K glitch will not seriously impact the global economy and send it into recessional tailspin, as some experts have argued, but will instead be a minor disruption, as previously reported.
"Given the sheer number of computers and chip-based systems, and the manual nature of the fixes that have emerged to date, we are likely to experience some degree of disruption, which I believe most likely will be mild and short-lived," Federal Reserve Governor Roger Ferguson said in prepared remarks for delivery to the Bank Administration Institute in Orlando, Florida today.
Connell argued that no enterprise can be completely certain of conducting business as usual when January 1, 2000 arrives. Her report advises companies to assume everything is noncompliant until proven otherwise.
The success of an entity's survival may well depend on the comprehensiveness of its contingency plan, according to Connell. A proper plan would include when it should be executed, the steps to be taken, and the work that must be completed in order for the plan to work.
"Companies should be prepared for the worst and have a triage plan already in place to allocate resources where they are needed first," she added.
Her report also raised the concern that "opportunistic" litigation may be thrust upon companies that have prepared for Y2K in good faith but, due to factors beyond their control, still experience systems failures.
The Controller said she may sponsor liability legislation to ensure that innocent California companies will not be vulnerable to runaway litigation despite their best efforts to be Y2K compliant.
If Connell goes forward with such legislation, it would be the second time such a bill would be filed in the California Legislature. As reported earlier, the Assembly Judiciary Committee failed to support a bill that would have exempted software firms or related computer companies from Year 2000 lawsuits claiming fraud, negligence, or unfair business practices, provided the companies took steps to make programs immune to the millennium bug.
The Year 2000 bug could cripple software that cannot accommodate a four-digit entry for the current year. Thus when 2000 begins, many programs will register only the "00" and read the date as 1900.