If you are a small business owner who has been putting off issues about computer compliance for the year 2000, or if you are scoffing at all the hysteria surrounding some of the more outlandish predictions for turmoil caused by what is known as the “Y2K” problem, consider this. Articles in magazines for lawyers are predicting that Y2K may present the biggest litigation opportunity in history for law professionals.
For example, an article in Lawyers Weekly USA is headlined “‘Year 2000’ problem creates bonanza for small-firm lawyers”. Types of claims that can be filed include those for fraud or deceit, breach of a maintenance agreement, implied warranty, negligent misrepresentation, malpractice, unfair or deceptive practices and products liability.
Lawyers Weekly said many lawsuits are expected to be brought by businesses against other businesses that fail to deliver goods or services as promised because their computers are malfunctioning. Lawsuits by businesses against computer software companies are also expected to be common.
The Y2K problem results with software that uses only two digits for the date, such as 99 for 1999. When the year 2000 rolls around, the software may see the number as the year 1900 with resulting problems. For example, a credit card machine could reject a card with the year 2000 as the expiration date.
Don’t ignore the threat
Although you would have to be living in a cave to have missed hearing about potential Y2K problems, there are concerns that many small business owners aren’t dealing with the issue.
“I’m concerned that small business owners are ignoring potential problems that may occur with their systems after Jan. 1, 2000,” said Jim Koerber, a CPA with The Koerber Company PLLC, in Hattiesburg who spoke at a Y2K conference in Hattiesburg in November 1998. “They aren’t taking time to decide what in their business might be affected. They need to take an inventory and see what they may need to replace. Some of the computer systems in small businesses may be outdated.”
Koerber said the Y2K issue has been compared to watching an Alfred Hitchcock movie.
“You know something bad is going to happen, but you don’t know what,” he said. “But at least you know when.”
It has been estimated that it will cost between $400 billion to $600 billion worldwide to enhance systems to process Y2K data. The total of all costs related to the problem, including lost business opportunities, litigation and making computers compliant, is expected to be as high as $4 trillion worldwide, according to the Gartner Group.
Small businesses could be hard hit
Koerber said the potential impact to small business is large, and some economists say there is a possibility of a recession related to the Y2K problem.
“The potential for disaster is considerable,” Koerber said. “Systems may crash, sorting may be incorrect, aging of balances may be meaningless, calculations may be inaccurate, databases may be corrupted and backups may be omitted.”
Besides worrying just about your own compliance, remember how much your business interacts with others. Business owners should address the vulnerability of sole source vendors, major suppliers, distributors, dealers, key customers, subsidiaries, affiliates and joint ventures. The vulnerability of the business physical plant is also important: elevators, heating and air conditioning, lighting and security, vaults, laboratory equipment or any other equipment with embedded chips is vulnerable to malfunctioning.
“People turn to lawyers for legal help, and to CPAs for tax help,” Koerber said. “They need to turn to computer consulting firms for expertise on the Y2K problem.”