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Substantive Performance

For CEOs, Directors, Presidents and Executives

(Criteria of Substantive Performance and Due Diligence for Year 2000)

Substantive Performance. Due Diligence. These terms are bound to enjoy unprecedented publicity during the next several years as legal fallout from the Year 2000 Technology Crisis begins to takes its toll. But do you really understand their meaning or implications? And are you taking the right steps to ensure you’re not sued?

The most progressive CEOs are already taking appropriate steps by establishing co-operative links with their customers and suppliers now. They understand the legal implications of interdependency, and the challenge posed to Y2K compliancy. At The Year 2000 Research Group (Y2KRG), we strongly encourage substantive performance and due diligence--in fact, we believe that meeting these requirements is the most effective way to avoid litigation. In our Year 2000: Business and Government Survival Guide, we make this point repeatedly, and we shall make it again in our forthcoming Year 2000 Crisis Management Guide. Protect the company, protect yourself. In other words, take remedial action now.

We offer you the following list of actions to help you meet your Year 2000 objectives while also avoiding legal problems:

Assumptions regarding income levels and income sources must be considered suspect from now on. Review all previously prepared budgets, projections, pro-formas and similar forecasting exercises. You may be forced to reformulate your spending for Year 2000 compliance, litigation, and professional consulting fees, these costs must also be added to your forecasted expenses.

Consider the possibility of having to postpone filing tax returns or paying income tax installments that could create both a tax liability and cash drain. Why? Because there will be increased expenses due to Year 2000 compliance, outright future business interruption, and possible operating losses that, for tax purposes, may have to be carried back to 1997 or 1998 in order to retrieve much-needed cash. Don’t use this cash up. And certainly don’t expect the government’s computerized reassessment system to be quick in generating refunds.

Define those whom you are dependent upon, since you cannot leave it up to them to take care of their interdependencies. It is clearly in your best interests to help them.

Ensure that your managers, corporate officers, and executives are well aware of their exposure to personal liability from failure to solve their firm’s Year 2000 problems. They should seriously consider reallocating their personal assets now. Will a judge have sympathy on those responsible for a foreseeable catastrophe?