New Report Throws Cold Water on Top Companies' Y2K Efforts

Large companies have had large Y2K budgets and resources to throw at the problem, while small to middle-size companies will muddle through. At least, that's the conventional wisdom. Now, an alarming new report reveals that some of the nation's largest corporations are lagging on fixing computer systems for Y2K.

Weiss Ratings Inc. (Palm Beach Gardens, Fla.), an industry watchdog group, concludes that none of the nation's 50 largest non-financial companies can be considered to have their systems Y2K ready. Three companies--Wal-Mart, Intel and Conagra--even received a Weiss Rating of "low," indicating potentially serious delays in preparing their systems for Y2K. Expanding this group to the top 100, only three qualify for a "high" rating--Costco, American Stores, and AMR.

"We've known for some time that small and mid-sized companies would have difficulties in their preparations for the new millennium," comments Martin Weiss, Ph.D., chairman of Weiss ratings. "But the poor progress made by so many of America's largest companies comes as quite a shock, implying potentially serious disruptions in the operations and profits of at least some of these companies." More than a third would not even disclose the state of their readiness.

Interestingly, only half of the documented Y2K funds collectively budgeted for the top 1000 non-financial firms--about $26 billion--have been spent. This indicates widespread delays and the likelihood of a major eleventh-hour rush to catch up as the end of 1999 approaches.

Weiss Ratings gathers its data by comparing publicly available data on Y2K budgets and expenditures over time and in relation to industry peer groups.

Weiss also rates banks, S&Ls and insurance companies separately, based on questionnaires sent to the institutions. In a related survey, 253 of 984 insurance companies, or 26%, have made inadequate progress. Of those, 118, or 12%, were assigned a Y2K grade of "below average," while 135, or 14%, were rated "low."

"To find one quarter of the survey respondents behind schedule is very disconcerting," says Weiss. "However, I am even more concerned about the group that did not respond to the survey. It is highly probable that an even greater percentage of these non-respondents are behind schedule, given the tendency for better-prepared companies to come forward more readily."

On the other end of the spectrum, 82 companies, or 8%, reported data that Weiss interpreted as an indication of "High" progress in their Y2K preparations. The remaining 649, representing 66% of respondents, indicated a level of progress that was deemed "average," reflecting adequate preparations at this time.

Companies receiving a "High" Y2K grade include Royal Maccabees Life Insurance Company (Mich.), Nationwide Life & Annuity Insurance Company (Ohio), and Security-Connecticut Life Insurance Company (Conn.).

Weiss attributes Y2K problems to the inefficiencies and inconsistencies of state regulation. "Based on some of the expected Y2K completion dates we've seen, it appears that many insurance companies are not even aware of regulators' timelines for fixing and testing their computer systems," says Weiss.

Unlike the banking industry, where federal regulators have mounted an aggressive national Y2K effort, the insurance industry is regulated by individual state departments, each of which is giving varying degrees of attention to the Y2K problem. However, a previous survey of financial institutions, conducted at the end

of 1998, found that 23% received low marks for Y2K preparedness.