By Esther McHugh

What is Y2K?
Y2K is a computer processing problem that results from the way electronic systems store dates. Until very recently, short-sighted programmers designed computers to express years by the last two digits. The result is that any date in the next century is liable to be confused with the previous century. Older computers will recognise January 1 2000 as January 1 1900, and so on.

What will be affected?
Any device which contains a microchip and uses dates in its programming could potentially suffer disruption or malfunction if it is not compliant with new programming standards. This includes street lighting, traffic control systems, and other electronically operated systems.

Government records based on the age of an individual, such as electoral registers, social security databases and tax information, are particularly at risk, as are systems dealing with payroll and financial transactions.

What are the legal implications of Y2K?
Lawyers are anticipating a flood of millennium bug litigation during the coming year, particularly in the United States.

Lawsuits are likely to fall into two broad categories: actions against companies which have not demonstrated due diligence in addressing the Y2K problem; and litigation against software distributors who have demanded that customers pay to upgrade recently released products.

The legal implications of Y2K began to take effect some time ago. Bird and Bird, a UK law firm, points out that as early as 1996 St Albans City Council successfully sued ICL, a computer services provider, over non-compliant software which overestimated the number of council tax payers in its area, and upset budget calculations.

Will consumer behaviour cause food and cash shortages?
There is a risk that as consumers stock-up on goods in order to prepare for potential disruptions, retailers will be unable to meet the boost in demand. Financial institutions are also bracing themselves for a sharp increase in the demand for cash in the run up to the millennium.

The New York Federal Reserve has been selling liquidity options to US banks in order to provide for this contingency. Nevertheless, bug psychology could still pose problems for the finance sector. Charles Schwab, the online stockbrokers, have warned that market panic is a possibility if brokers' switchboards are jammed as a result of Y2K jitters.

What risk does Y2K pose to the global economy?
The IMF has established a credit facility for countries faced with balance of payments difficulties as a result of the millennium bug. In micro-economic terms, the fact that some businesses are better prepared than others for the date change means that the bug could cause supply chain disruption.

Kevin Brown, the Financial Times industry editor, points out that companies' reaction to the bug may result in a general economic downturn after January 1, as the buffer stocks built up in preparation for a worst case scenario will subsequently have to be run down, leading to a global reduction in demand.

What is the cost to companies?
Gartner Group, the US IT researchers, estimate that the global cost of outwitting the millennium bug will fall between $300bn and $600bn, as companies bring in specialist programmers to find and fix every date reference in their systems. Correctional packages are available for common software products, but customised programmes have required extensive manual testing.

What are the risks for households?
ost household appliances are not date dependent and should not be affected, although personal computers, fax machines and video recorders may have to be reset.

ost of the world's major banks have declared themselves Y2K compliant and maintain that there is no need for consumers to make special financial arrangements.

The outlook for services such as power and water depends largely on the preparedness of local authorities.

Are all countries well prepared?
Reports by auditors and government agencies have confirmed that the world's most industrialised nations are generally Y2K compliant. Concerns that smaller businesses may not be ready for the date change have surfaced in Germany, France and the UK.

China's Y2K spokesperson has warned that the country's businesses and hospitals have not been adequately protected against potential problems, although its utilities are compliant. In Russia, foreign companies and diplomatic missions have expressed concern over the government's low-key approach to Y2K planning. Latin American and Caribbean countries have been identified as among the least prepared.