Business-like, isn't he?


 

 




biv

ISSUE 465: The high-tech office- Sept 22 1998

ALAN ZISMAN

The Year 2000 bug is moving from a tech issue
to a broader social and business problem

As we get closer to the end of this millennium, it becomes clear that the Year 2000 situation is moving from purely a technology issue to a much broader social and business problem.

Here are some of the ways the Y2K crisis is making news among accountants, lawyers and the insurance industry.

The Canadian Institute of Chartered Accountants has released Y2K guidelines for accountants and auditors. Canada is the first G7 country to require Y2K-preparedness financial disclosures.

In an August 10 story in Computing Canada, CICA president Michael H. Rayner stated that the Canadian Accounting Standard Board is requiring both public and private companies to indicate in their financial statements whether they could experience Y2K-related problems. The idea is to make potential investors aware of potential mishaps.

In most circumstances, a minimal statement discussing the uncertainty of future financial results caused by the issue is all that is required.

As well, companies are encouraged to disclose qualitative information about this issue in communications with stockholders through media such as annual reports.

Rayner pointed out that currently these are only required for companies filing financial statements under the terms of the GATT trade and tariff agreement, but that similar disclosures may soon be required by banks, stock exchanges and others.

He noted that even companies that feel that they are Y2K-compliant should point out the uncertainty stemming from the potential for problems somewhere along their supply chain.

As far as auditors are concerned, they are not responsible for providing assurance that a business is Y2K-ready, but rather for discovering errors or misstatements in the financial statements. Copies of the guidelines are available at www.cica.ca.

Similarly, the Canadian Bar Association's Working Group on the Year 2000 has reported in.

That group's document, Countdown to 2000: The legal issues, is available for download from the CBA Web site (www.cba.org).

Locally, the law firm of Clark, Wilson is publishing The Millennium Challenge, subtitled "A Y2K Risk Management Newsletter for Business."

The summer issue includes information on directors' and officers' liability, which notes that "directors and officers may be personally liable." As well, there are reviews of Y2K lawsuits that have already begun to appear on the court dockets.

For copies, call Clark, Wilson at 687-5700 or e-mail central@wilson.com.

Meanwhile, you don't have to worry about losses due to Y2K -- you're insured, right?

Maybe not. The insurance industry is trying to exclude damage due to Y2K issues from business coverage. Customers, of course, are not impressed.

According to an August 14 InfoWorld article, insurers suggest that customers have known about the possibility of loss due to Year 2000 problems and therefore those losses are not fortuitous (i.e., unexpected).

Up until now, insurance compan-
ies have been undecided whether
to add specific wording excluding Y2K losses, since that might imply that such losses were covered under previous policies.

However, reinsurers, who insure the insurance companies, have indicated that they will no longer cover policies that lack such exemptions; expect to see them showing up in policies written or renewed by the end of the year.

It's suggested that multiyear policies extending beyond 2000 may not include such exemptions and might be the best bet for businesses looking for coverage that includes Y2K-related losses.

And if you can find coverage, expect to pay a hefty premium.

According to William Kelly, president of the International Federation of Risk and Insurance Management Associations, some proposed policies would provide a maximum of US$200 million coverage, but cost US$20 million.

It's been pointed out the cash reserves of the entire North American insurance industry total US$380 billion, while some estimates of Y2K litigation could reach US$1 trillion.

The Millennium Challenge newsletter ends with this disclaimer: "The information contained in this newsletter should not be treated by readers as legal advice, and ought not be relied on without legal counsel being sought."

I'm neither an accountant, a lawyer nor an insurer; this column can't give you the final word on how to deal with the effects of the Year 2000 in any of those areas. But it is clear that the Year 2000 will have broad-reaching effects.

It's not going to be enough to make sure that your computers are Y2K-
compliant.

You absolutely need to be aware of the potential effects in all areas of your business. *


Google
Search WWW Search www.zisman.ca



Alan Zisman is a Vancouver educator, writer, and computer specialist. He can be reached at E-mail Alan