Y2KWISE, DOUGH IS BETTER THAN DOCS

The financial services industry received the highest possible assessment of five stars for Y2K readiness in a Senate report released last month.

The Senate Special Committee on the Year 2000 Technology Problem’s vice chairman, Sen. Christopher Dodd, D-Conn., says that contrasts with health care, for example,which as a whole received two stars for the “overall quality” of its risk exposure while physicians’ offices, rural and inner-city hospitals and nursing homes all received low ratings for progress and data quality regarding Y2K preparedness.

No matter how ready, U.S. businesses still might be the target of Y2K-related litigation despite enactment this year of a law granting them some relief from that kind of liability.

Much of the litigation that concerns the authors of the report, titled “Investigating the Year 2000 Problem: The 100-Day Report” won’t be heard in U.S. courtrooms, but rather in those overseas.

The international exposure “is obviously one we have very limited authority over,” says Mr. Dodd.

The report also notes the outlook for litigation falling under Congress’ Y2K Act also remains hazy.

“The potential exists for certain countries to utilize their laws to unfairly recoup the costs of Y2K remediation by holding U.S. firms liable for Y2K-related disruptions,” states the report, issued by the special committee.

The report states that as of June 30, 74 Y2K-related lawsuits had been filed, according to a survey by PricewaterhouseCoopers LLP.

The majority – 65% – involved noncompliance, 13% were class-action shareholder suits, 9% involved efforts to prepare for the millennium bug, 7% were filed against entities on grounds that they did not adequately disclose their Y2K status, 4% were insurance claims and 2% were contract disputes.

Despite the uncertainty over litigation by overseas companies, the tone of the report is generally upbeat.

“We are in better condition than we had any reason to hope for” only a year earlier, says the special committee’s chairman, Sen. Robert Bennett, R-Utah. “There will not be a horizontal systemic failure,” Mr. Bennett says, adding that he believes most problems will be solved relatively quickly.

A related area of concern is state governments, particularly with regard to the administration of federal health benefit programs such as Medicaid, Mr. Dodd says.

Another concern is small business. A survey conducted by the National Federation of Independent Business and Wells Fargo Bank this spring found that 28% of the small-business respondents planned to take no action regarding Y2K, Mr. Dodd notes.

The final concern he cited is the international area.

China, Russia and Italy are among the countries that appear to be lagging the farthest behind in preparedness. Japan, once feared to be among the worst laggards, now appears to be in “much better” shape than had been thought only a few weeks ago, the senator says.

He cautions, though, that some countries claiming to be prepared may not be as far along as they say.

“In some countries where we have good reports, we don’t have independent assessments,” says Mr. Dodd.

Crain News Service