The new global economy holds great promise for U.S. companies--and potential nightmares for businesses dealing with foreign partners that have not adequately prepared for the Year 2000 computer glitch, experts and government regulators warned yesterday in New York City.
The remarks came during the second hearing of the Senate Special Committee on the Year 2000 Technology Problem, held to attract the eyes of Wall Street analysts and investors and to highlight the global significance of the Year 2000 bug.
The millennium bug or Y2K problem stems from time clocks in computers that recognize years in only two digits and will not be able to differentiate between the years 2000 and 1900.
Power outages and disruptions to telephone service and other vital services, like financials, could result if the snafus are not fixed on computers that run those systems, critics warn.
Financial bigwigs representing the New York and American Stock Exchanges, national banks, and investment houses, as well as members of academia, spoke before the Senate panel addressing the status of remediation efforts, the results of any testing performed to date, and the development of contingency plans by foreign financial companies on the Year 2000 problem.
The committee also examined the potential negative impact of Y2K system failures abroad on the United State's economy, and considered ways in which the government and the private sector could work together to mitigate those risks.
"American financial institutions deal with their international counterparts virtually every minute of the day as they settle transactions, execute currency trades, and operate offices throughout the world. Americans have invested significantly in foreign stocks, primarily through investment funds, and the stocks of American companies are traded at all hours of the day and night in markets throughout the world," explained Sen. Robert Bennett (R-Utah), the chairman of the special committee, in his opening remarks.
Given this high level of interaction, he said, "any significant computer system [crash] abroad could have a devastating impact in the United States."
What hadn't been looked at before yesterday was the ways in which U.S. companies have prepared to protect themselves from the foreign risk of Y2K failure, Bennett said.
There are some basic actions companies can use to protect themselves, said Ann Coffou, who wasn't at the hearing, but is an expert on the Year 2000 bug and an analyst for the Giga Information Group. "We recommend that companies approach it from a risk perspective...ask yourself where your exposures are. It is best to address it individually," meaning from one foreign partner, or investor, at a time. "Work it from a criticality perspective. And nothing beats old fashioned communication."
Global awareness of the issue has become a hot issue as national leaders learn the strengths and weaknesses of the global economy, most apparent during economic downturns like the current one in Asia.
Just last month, the United Nations passed a resolution on the Year 2000 technology problem, appealing to all member states to cooperate on global awareness initiatives and calling upon the governments, the public, and the private sector to share their experiences in addressing the issue.
"It is no longer sufficient to discuss the international risk generally," Bennett said. "We must identify the specific risks, do what we can to solve the problems, and develop and implement contingency plans to deal with the inevitable failures."