Magazine article Business Credit

The Year 2000 Problem and Its Importance to the Credit Grantor

Magazine article Business Credit

The Year 2000 Problem and Its Importance to the Credit Grantor

Article excerpt

Are you ready for Y2K? There are now fewer than 365 days remaining until the year 2000 and worse still, there are fewer than 250 business days. Is your organization well on its way to recognizing, addressing and fixing the tormenting problem of the double zeros? More importantly, as an investigator safeguarding one of your company's largest assets, are you asking your customers what they are doing to analyze, convert, test and integrate the most pervasive and critical technological venture the world has ever faced?

Background

The imminent year 2000 crisis (Y2K) is rooted decades ago, when programmers standardized on a two-digit format to record the year ("85", for instance, represents 1985); thus, the computer assumes that the first two digits of the year are 1 and 9. In many cases, programs will not work correctly with dates after Dec. 31, 1999 - does 01 stand for 1901 or 20017 The problem exists in multiple places: data definitions, screens, reports, program logic and data files.

Obviously Y2K is not a giant technical problem; programmers are not struggling to find some complex technology that will make fixes possible. Redefining variables to accommodate four-digit dates or modifying logic to properly calculate dates after Jan. 1, 2000, is not really difficult. However, doing this with 100 percent accuracy in your organization and being satisfied that your customers' applications have been adequately corrected is probably unrealizable. After all, can you guarantee that any of your software is 100 percent bug-free?

This is the biggest crisis the high-tech industry has ever faced. The media often refers to Y2K with amusing anecdotes. Maybe you have read about packaged foods and medicine with expiration dates of 1902 or brand-new credit cards that are declined because they expired in 1905. The media accounts can be entertaining, but the problem is far more complex than they usually state. Reports indicate that those who should grasp the scope and nature of the Y2K crisis -the media, corporate executives and government officials - clearly do not understand it, and consequently are not giving it the attention it deserves.

Some of the most important business applications, such as accounting software, personnel records, loan calculations, insurance and business forecasting depend heavily on dates and calculations based on the year.

The Gartner Group, one of the world's leading authorities on information technology (IT), has come out with some shocking predictions. According to a recent Gartner Symposium it is estimated that between 60 and 80 percent of all computer applications will not be Y2K-compliant in time, and that it will cost $300-600 billion to fix the problem. Any software that projects into the future will come unglued well before then.

Questions You Should Ask

As prudent credit professionals, you should investigate some points concerning your customers' Y2K status - at least your key customers - to help safeguard your extension of credit to them. As with any credit query, the level of investigation may vary from one customer to another; however, here are a few suggestions to determine the level of progress your customers are making:

* Has the customer undertaken or completed a comprehensive analysis of their Y2K vulnerabilities?

* Have they allocated full-time resources in terms of people and budget to deal with the problems?

In your opinion are they underestimating the extent of the problem?

* Can they alleviate the most critical problems in time and cope with the rest later?

* Do they have contingency plans or backup options if they fail to reach minimum Y2K compliance?

* Are their suppliers, distributors and key customers addressing their needs?

How does your customer monitor their suppliers? Do weak links exist at any of the points that could affect their company?

* Have they examined their legal liabilities? …

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