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Year 2000 - Whose Compliance Problem?
Let's think about this for a minute. Whose compliance problem is Year 2000? Clearly it is a problem for banks. Anyone who doesn't know that has had their head in the sand for a very long time - deep in the sand.
Now, of course, we are realizing that Year 2000 is also a problem for our customers. The more imaginative among us figured this out some time ago. So now banks - even commercial lenders - are busy trying to figure out the extent of the problem or challenge for each commercial customer and what the customer is doing about it. And the regulators are warning us that if the customers don't do something about Year 2000, the bank needs to do something about the customer - like call the loan.
As bankers and compliance professionals, we focus on learning what the job is, designing a plan, and then getting the job done. We take pride in this. It is important. It is difficult. It manages the bank's risk. Clearly, Year 2000 is serious risk exposure for the bank. We can't let it happen.
When we set out to manage risk, we first size up the risk. What is it? Where does the risk come from? How risky is it? Why is it risky? When are we most at risk? What are the consequences? Then we figure out a plan. What needs to get done? Who needs to do it? Who checks it? After that there is monitoring and auditing to put in place. And, of course, endless training.
But wait a minute. Why is Year 2000 a problem and whose problem is it? While banks are busily committing extensive resources to the Year 2000 problem, it might be amusing to stop and think for a minute. Whose problem is this really and what is the bank's role?
Why is Year 2000 a problem? It is a problem because, in the dark ages of computers (about 25 years ago) someone decided to save space by storing only two digits instead of four to establish the year. Then they invented an elaborate - but space-saving - method of ensuring that the computer did a double-check to make the computer think that the first two digits are "19." This becomes a problem when the first two digits become "20." But this is something that computer programmers in the dark ages never thought would happen. After all, it was another whole century!
Well folks, it is happening - soon. And everyone else seems to think it is going to happen. Where have these computer wizards been? And - wait a minute - what are they doing right now? Well, for one thing, they are raking in the profits. Not only did they make money by selling us computers and software that are about to go bananas, they are making even more money by selling us solutions. And the solutions are expensive!
OK. Let's go back to the problem. Whose problem is this? Wasn't the whole problem created by those computer programmers back in the dark ages? Why shouldn't they have to fix it? Admittedly that was a long time ago and many of them are no longer around.
But the picture changes shape when we look at what the computer industry has been selling us recently. What about Windows '95, that hot new product that has almost taken over the PC world? Check it out, folks. Most versions of Windows '95 are NOT Year 2000 compliant!
This is a tough pill to swallow. This means that one of the most profitable software companies in the world owned by one of the world's richest men has been selling us a product of limited use for a high price. And the customers are the ones who have to pay to fix it. Is something wrong with this picture?
Compare computer or software compliance with bank compliance. How many computer companies are prepared to fix the problem or pay restitution? How many will allow you to rescind your purchase order if the product is not year 2000 compliant? Clearly, the computer industry is held to a different standard. Why don't banks, who are the customers in this case, demand something like "Truth in Computing"? Why do banks have to pay for someone else's mistakes?
Copyright © 1998 Compliance Action. Originally appeared in Compliance Action, Vol. 3, No. 3, 3/98
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