Year 2000 Problem: Disclosure Obligations and Impact
Jinnett, Jeff, The Journal of Lending & Credit Risk Management
Year 2000 software corrective work requires a considerable programming effort of examining tens of thousands, even millions, of lines of source code (software code readable by a human programmer) to locate and correct every two-digit year date. Although the costs of corrective action vary from company to company, it is not unusual to find reports of approximately $1.15 per line of source code to correct the date field problem. Further, computer experts advise that no "silver bullet" exists to correct the year 2000 problem.(1) There is, therefore, apparently no way to circumvent the huge investment of time and money that is required and no way to extend the final deadline of 11:59 p.m. on December 31, 1999.
Although it appears that any firm or institution can become year 2000 compliant if it starts corrective action soon and devotes sufficient resources to the effort, year 2000 experts advise that the effort begin now rather than wait any longer. There is an all-too-real possibility that delays may result in insufficient time to complete all the required reprogramming work.
Year 2000 Corrective Cost in the Billions
Private Sector. The Gartner Group has estimated that the cost of correcting the year 2000 problem worldwide is approximately $300 billion to $600 billion.(2)
In a recent industry analysis, J.P. Morgan Securities, Inc., has estimated, based on its own research, that the cost approximates $200 billion.(3) The cost for software code changes, whether by an internal team or by an external technology resource, is not all of the expense. The post-fix costs of parallel testing, additional fixes, retesting, and possible new test bed equipment are sizable parts of the costs as well.
Public Sector. The estimated cost of correcting all the affected computer systems of the federal agencies is approximately $30 billion.(4) It is likely that state governments also have substantial year 2000 problems, since state governments also are significant information technology purchasers. In fact, the governments of 46 states, 6 cities, 3 counties, and 2 school districts have greater annual revenues than Dow Corning, which ranks as number 500 on the Fortune 500 list.(5) For example, New York City's year 2000 corrective costs may exceed $100 million, according to a report issued by the New York City Council's Task Force on Technology in Government.(6)
Status of Year 2000 Corrective Efforts
Private Sector. The Gartner Group offers the chilling estimation that approximately 50% of the companies with the year 2000 computer problem may not become year 2000 compliant in time and will have all or part of their computer systems shut down (or start producing incorrect data) on or after January 1, 2000.(7)
Public Sector. The recent federal survey sent out by the U.S. House of Representatives Government Reform and Oversight Subcommittee on Government Management, Information and Technology indicates that many federal agencies are at the very beginning of their inventory stage.(8)
The status of year 2000 corrective efforts by the various state governments was the subject of a recent survey conducted by NASIRE, with 44 states responding.(9) NASIRE's survey indicates that most states are still in the planning mode,with only 13 states reporting that they are in the implementation or testing phase.
Unless software tools are discovered that can speed up the corrective and testing process considerably, it appears possible that at least some private sector companies and federal and state agencies will not become fully year 2000 compliant in time, resulting in disruptions to their operations. In this regard, it also should be noted that some companies and agencies have to produce projections going forward to 2000, which will trigger a system failure before January 1, 2000.(10)
The Office of the Comptroller of the Currency has issued (jointly with the Federal Financial Institutions Examination Council) Advisory Letter 96-4 advising all national banks to become year 2000 compliant by December 31, 1998, leaving one year for testing. …