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RISK MANAGERS TAKING STEPS NOW TO ADDRESS Y2K PROBLEM; PLANS INCLUDE ADDRESSING SUPPLIERS' COMPLIANCE STATUS

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Many risk managers are not waiting for the clock to tick down on the Year 2000 computer problem.

In addition to exploring coverage options for the risk, many are taking preventive measures to minimize their exposure.

The Year 2000 issue is "certainly the biggest" facing risk managers right now, said William J. Kelly, a managing director at J.P. Morgan & Co. in New York.

"I think the major firms have the resources to address it," Mr. Kelly said. But some smaller operations, especially those not subject to a lot of outside scrutiny, may not make changes in time, he said.

"You have a whole spectrum, from banks that are closely watched to others that are not subject to testing or audits," Mr. Kelly pointed out.

It's a "scary risk for us," Michael McDonald, director of risk management at Tampa, Fla.-based Walter Industries Inc., said of the Year 2000 bug.

Walter Industries operates foundries, coal mines, aluminum manufacturing facilities and other businesses heavily reliant on computer chip technology.

"We're about 70% there," Mr. McDonald said of a process to make sure all computers and chips recognize the year 2000 and function properly at the time. "Our objective is to be completely there by the end of the year."

A larger worry is whether Walter Industries' suppliers will be ready when the date changes, Mr. McDonald said. "We're not bringing on any new suppliers until they can certify that they are in compliance."

And, he added, the company is responding to customers' queries about Walter Industries' readiness, in part, by asking " 'What about you?' If they shut down, we have no one to sell our products to."

Burlington Industries Inc. also sent letters to vendors asking about the vendors' compliance status and plans to correct problematic software if any is found, according to Gerard McCabe, director of risk management for the textile manufacturer in Greensboro, N.C.

The Year 2000 computer problem "is a concern for all of us. The bigger issue is how insurers will respond," said Christopher Johnson, director-risk management at Campbell Soup Co. in Camden, N.J.

In recent months, several insurance companies have notified brokers and policyholders of the need to address potential Year 2000 problems (BI, June 29).

Year 2000 exclusion wording from the Insurance Services Office Inc. was made available to insurers April 1 (BI, May 18; Dec. 15, 1997.)