Year 2000 Information
BROKEN HILL PROPRIETARY CO LTD
22 September 1999
RELEASE TO THE AUSTRALIAN STOCK EXCHANGE AND THE UNITED STATES SECURITIES AND
EXCHANGE COMMISSIONYEAR 2000.
Year 2000 Information and Readiness Disclosure Act 1998
(United States of America)
This disclosure is made under the Year 2000 Information
and Readiness Disclosure Act 1998
This communication contains certain forward-looking statements. Such
forward-looking statements are not guarantees of future performance and
involve known and unknown risks, uncertainties and other factors, many of
which are beyond BHP's control, which may cause actual results to differ
materially from those expressed or implied in the statements contained
therein. While BHP is undertaking a process intended to achieve Year 2000
readiness of its systems, there can be no assurance that this process will be
successful in whole or in part or that the date change from 1999 to 2000 will
not materially affect BHP's operations and financial results. This is
particularly true in light of BHP's dependence on third parties, such as its
suppliers and customers, whose Year 2000 readiness efforts are outside BHP's
control.
BHP provides the following further information about its potential exposure to
Year 2000 problems with computer systems, and about progress of risk
mitigation. This information restates and updates the BHP release to the
Australian Stock Exchange and the United States of America Securities and
Exchange Commission of 29 March 1999.
BHP conducts a diverse range of business activities in a large number of
countries.
The Company uses computer systems across its businesses. These computer
systems include industrial production and control systems, business systems,
office systems, network and communications equipment and devices which contain
a computer chip ('embedded systems') such as building environment controls and
elevators. Personnel from one of BHP's businesses, BHP Information
Technology, service external customers as well as provide a significant
proportion of BHP's information technology delivery services. BHP has
numerous relationships and interfaces with public infrastructure, suppliers,
customers and business partners (ranging from individuals and small businesses
to international conglomerates) in a wide variety of environments across the
world.
BHP has been addressing the Year 2000 issue since 1996. Responsibility and
accountability for managing it, like other business issues, is delegated to
the Presidents of the principal businesses of BHP. A number of Year 2000
projects of differing size and complexity are being carried out within BHP's
businesses and the corporate centre. In addition a number of projects are
being managed by joint venture partners. We have processes in place for
co-ordination and sharing of learning across the Company. In December 1998,
we formed the Year 2000 Council to identify and manage BHP wide risks and
activities beyond the scope of individual business unit rectification
projects. The Council is chaired by the President Services and comprises
senior representatives from the BHP businesses and from core functions.
The overall approach which BHP has adopted is one of measured and managed
risk, with a commitment to fully review systems that impact on safety and the
environment. The four main steps to the process we are following at the
project level to address BHP's systems are:
. Conduct an inventory of systems that are potentially affected.
. Assess risks for each system.
. Decide whether to fix the system, replace the system with a new compliant
version or system, or put in place contingency procedures for the period of
failure.
. Implement and test the determined solution.
BHP's Year 2000 Project will continue through to March 2000, covering the Leap
Year issue, at which time we will reach 100% completion. Therefore we
anticipate approximately 98% completion at year end. As at the end of August
1999, taken overall and allowing for the different sizes of projects, and
transition/contingency planning, we have achieved 92% completion.
On average, and taking into account the different sizes of projects,
completion by activity was as follows as at the end of August 1999:
. Business systems > 95%
. Desktop systems > 95%
. Process Control systems > 95%
Our Year 2000 project budget was previously set at $85 (US$55) million.
Details of our expenditure to date and forecast to completion are as follows
(as at 31August, 1999):
$ million US$ million
Actual expenditure to 31 August, 1999
75.2 49.1
Forecast to spend after 31 August, 1999
9.7 6.3
Total forecast expenditure
84.9 55.4
Progress made over the past six months, and details of our new initiatives for
the different parts of BHP's Year 2000 Risk Mitigation Program are summarised
below:
Internal Systems
We set a scheduled completion date of 30 June, 1999 for assessment,
remediation and testing of internal systems. We have met this target date for
most systems. For a small number of systems completion has been delayed by
operational conditions, availability of software or availability of
implementation windows. Consistent with our managed risk approach, where
critical systems are involved, we have developed contingency plans.
Some software vendors are continuing to release patches (modifications) for
Year 2000 compliance, or are modifying their upgrade recommendations. This
poses a potential risk if it continues. As a precaution, we have issued
guidelines for managing the acceptance and implementation of such software
changes, and we are taking residual risks into account in our contingency
planning.
External Systems
We have continued work on the assessment of readiness of external suppliers
(supply chain and infrastructure), using a consultative approach. In the case
of infrastructure suppliers, a number of industry associations and
coordinating bodies have been established to address Year 2000 issues. BHP
has monitored these closely, and has been actively involved and contributed
where appropriate.
We have initiated a similar proactive approach with major customers.
Although BHP still recognises that some suppliers will not achieve a
satisfactory level of compliance, consultation during this period has enhanced
our confidence that significant trading partner failures will not occur. Our
contingency plans take potential trading partner failures into account.
Transition and Contingency Planning
Transition and contingency planning is well advanced. In the planning work we
have completed to date, we have not encountered any situation in any of the
BHP businesses which cannot be handled through appropriate and standard risk
management processes. Nevertheless, BHP recognises that transition and
contingency plans will need to be refined right up to the century rollover,
in the light of updated information, e.g. from software vendors or suppliers
of services.
The transition and contingency strategies we have adopted in our individual
businesses include:
. shut down of operation, followed by controlled restart;
. changing to a controlled mode of operation;
. providing additional feed or in process stocks;
. reverting to manual operation;
. bringing forward or delaying business system cutoff dates;
. manual recording of information; and
. provision of additional support staff.
Transition and Crisis Management
BHP has an extensive range of operations in many countries, in its Steel,
Minerals and Petroleum businesses and Services activities. The Company
already has well established processes for managing disruptions and crises.
To handle the Year 2000 transition, each of the BHP businesses are
establishing their own management structure, using for the most part elements
of existing crisis management processes, but taking into account the unique
nature of the Year 2000 problem.
We are establishing an Information and Crisis Management system at the
Corporate level. The purpose of this is to ensure that:
. we have a coordinated assessment of status across the BHP businesses
globally, which we can communicate internally and to external stakeholders;
. appropriate senior managers are immediately at hand for prioritisation of
recovery and for crisis coordination, in the event of simultaneous crises
occurring in different businesses.
Other Activities
BHP has continued its work in a number of other areas, including
. Joint ventures - BHP employees have continued to assess Year 2000 risk
associated with joint ventures and have worked with partners in a number of
activities, including auditing of partner's Year 2000 programs.
. Divestments and acquisitions - We are managing Year 2000 issues associated
with the changing structure and portfolio of BHP's assets.
. Internal audit - BHP has conducted an enhanced internal audit program during
the period, with additional auditors being assigned to this work.
. Policies - We have established Year 2000 Policies for:
- Human Resources; and
- Communications, both internal and with external parties
Summary
Overall, BHP's progress is broadly according to plan. We are monitoring items
of work that are behind schedule using our project reporting system and
managing these items overall through the Year 2000 Council.
We recognise that in a number of areas BHP is at risk from circumstances
outside of its direct control, such as external products and services. We are
following a proactive and consultative approach to resolve issues jointly with
suppliers wherever possible. Residual risks are being addressed through our
contingency planning.
We have successfully passed four 'key dates', which were:
. June 1st - the start of BHP's new financial year;
. July 1st - the start of the new financial year in Australia and in some
other jurisdictions;
. August 21st - the GPS (Global Positioning System) week number rollover
(although this is not strictly speaking a Year 2000 problem, we are managing
it as part of our Year 2000 program); and
. September 9th - the significant computer programming figure of 9999.
In these cases, we experienced a small number of system problems which we
resolved through normal support processes, with no business impact. These
problems were consistent with what we would normally expect for milestones of
this type. The Company will continue to monitor its performance over key
dates up to and beyond the main transition on January 1st, 2000.
Since BHP's release to the Australian Stock Exchange and the United States of
America Securities and Exchange Commission in March 1999, there have been no
material changes to our assessment of BHP's potential exposure to the Year
2000 problem.
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