The Millennium Bug

Well, if you haven’t heard of the Millennium Bug yet, you must have been on safari in the South American jungle for the last few years – or perhaps you are just too busy trying to run your business. Never mind, here is a brief run down on the problem, its causes and its possible effects.

The problem

The “Millennium Bug” or “Year 2000 problem” or “Y2K” refers to issues which will arise if computer systems are unable to process the date correctly in the year 2000. The problem arises in the way dates are held and processed in many computer programs.

In those ancient times twenty years ago, when computers were in their infancy, computer memory was at a premium and many computer systems recorded dates using only the last two digits to represent the year. Thus the computer system saw “81” became “82” at midnight on 31^st December 1981 as the fireworks lit up the skies all over the world. Similar changes have continued every New Year since. However, at midnight on 31^st December 1999, “99” will become “00”. The computer will see a year number not one more than immediately before, but 99 less and computer programmes which process calculations involving dates may fail causing substantial problems throughout the world.

How will it affect you?

You don’t own a computer? Then how did you log on to our web site? If you own a PC, which you use only for Internet access and games (educational ones of course) the chances are that your PC will suffer no greater anguish than the necessity to reboot at midnight on 31^st December 1999. However, it does seem unlikely that you will be at the keyboard as the greatest celebrations of the millennium take place around you.

But the effect of the millennium bug on your own PC may be the least of your problems.

The Bug may cause the failure of software including embedded applications in control chips resulting in:

• Timers on all sorts of domestic appliances ceasing to operate – central heating controls, etc.
• The ATM machine not operating – no cash available on new year's day!
• Interest not being credited to your savings account
• Incorrect insurance premiums being charged
• Vehicle ignition systems failing

But the wider possibilities are of even more concern.

• Computer control equipment on a vast range of industrial machinery ranging from oil refineries to steel mills may fail.
• Guidance equipment on ships and aircraft may supply incorrect readings.
• Telecommunications equipment may cease to operate.
• Power stations may malfunction causing massive brown outs.

It is impossible to evaluate the magnitude of the Year 2000 problem and to quantify the potential costs involved. But, the millennium bug has strategic, financial, legal, operational, technical and commercial implications for all business enterprises, which could affect their long-term viability.

What can you do?

Some individuals are expecting a massive breakdown in the actual fabric of society. They are buying food and water and storing necessities for the catastrophe that they anticipate. Do not mock! They may be the prudent few! However, billions of dollars have been spent worldwide to identify the issues and minimise the disruption that will be caused and we do not anticipate the end of civilisation.

The Year 2000 problem will affect many aspects of all business enterprises, and to protect your business a Risk Management approach is necessary to identify, evaluate, plan, implement and manage your Year 2000 risks. If you rigorously scrutinise the Year 2000 issues using risk management techniques, your enterprise should be able to fully understand the impact that Year 2000 could have on your business and take the action necessary to ensure your business survival.

Insurance

Insurance can only provide a small part of the solution. The insurance industry will not take on all the business risks of Year 2000 non-compliance. Most risks will remain excluded. A limited buy-back of excluded cover may be offered by some insurers but this will only be available once underwriters have been satisfied as to the adequacy of the your risk management of the problem.

And what can Trafalgar do to help?

The real threat of the Year 2000 problem lies not in the immediately obvious, but in the hidden impact on customer and supplier relationships, staff, corporate and management issues. It is essential for your business to identify all Year 2000 non-compliance issues for yourself and the market in which you operate. You must ensure your Year 2000 programme encompasses strategic, financial, legal, technical, operational and commercial issues and look at the impact of these before and after the millennium.

We have developed a Risk Management model, which provides a strategy for Year 2000 compliance and involves.

• Defining your Year 2000 problem and how you establish compliance
• Identifying your Year 2000 programme’s initial scope and resources
• Advising the Board fully of the threats and opportunities
• Developing a Year 2000 Strategy with key milestones
• Communicating the strategy to shareholders, suppliers, lenders, customers and staff

Responsibility

Prime responsibility for your company’s survival into the next millennium lies with the Board of Directors. They must be fully advised and fully involved in the management of the implementation of any successful Year 2000 programme. As directors and officers of the company they may be legally responsible for failure to:

• Shareholders
• Customers
• Lenders
• Staff

Conclusion

Your IT consultants will provide you with an IT solution. The wider business implications of Year 2000 non-compliance may be far more severe. The exposures will vary from one business to another and the risk management of these exposures may be unique to your company.

Trafalgar offer advice on dealing with the wider business risk exposures caused by the Year 2000 problem. We can help you with:

• Risk analysis
• Continuity planning
• Risk finance options
• Insurance updates

Contact Trafalgar now to ensure your business not only survives the millennium but also prospers safely well into the future.

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