Bank of Montreal 1999 Annual Report Download - page 49

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Bank of Montreal Group of Companies 1999 Annual Report 43
We have completed Year 2000 compliance for all critical
assets and business operations as well as for virtually
all non-critical systems. We have successfully tested
our systems’ interfaces with those of our
key suppliers
and clients in a Year 2000 compliant test environment.
A priority during 1999 has been contingency planning
and transition management. We have modified our busi-
ness contingency plans to incorporate Year 2000 risks.
A transition management team, with representatives
from across the organization, has been created to man-
age the transition at an enterprise level. Simulations in
individual banking groups and across the organization
continue to take place to test the effectiveness of our
contingency plans.
In addition, we are continuing with two corporate
programs to ensure the Year 2000 compliance status of
our systems. Clean Management is a maintenance and
monitoringinitiativepracticedbyallemployeestoensure
that our remediation of systems and equipment is not
compromised by any subsequent change to our assets.
Our Freeze Program, effective April 30, 1999 for applica-
tions and June 30, 1999 for infrastructure, has halted
major system implementations. All requests for new
implementations are reviewed and granted exception
status only if the implementation can be made without
compromising our Year 2000 compliance.
We have worked with other major banks and third
parties to ensure that interconnected systems within the
financial sector work together in a Year 2000 environment.
We have participated with other major banks in Canada in
industry-wide tests with organizations such as the Interac
Association, CIRRUS®, the Canadian Payments Association
and the Canadian Depository for Securities (CDS).
We have performed Year 2000 readiness assessments
of major third parties with which we deal, including
clients, counterparties, payment systems and vendors. A
credit working group has been managing Year 2000
risks across the lines of business and continues to assess
the overall risks of major borrowers in targeted market
segments which include Canadian commercial accounts,
Harris clients, corporate accounts and financial institu-
tions. This process includes ongoing reviews of the
impact of Year 2000 issues on borrowers. Based on our
current evaluation of the information we have received
to date, we do not expect that the Year 2000 issue will
haveamaterialimpactonthequalityofourloanportfolio.
We believe our total allowance for credit losses is ade-
quate to cover currently foreseeable losses, including
any potential impact associated with the Year 2000 issue.
We have communicated to our clients that the finan-
cial records of their accounts will be protected and
that
their securities and money will be safely held in
their
accounts. As part of our contingency preparations,
we
have worked with the Bank of Canada, and we expect
that we will meet increased demands for cash during
the Year
2000 transition.
Intotal,weexpectthecostofsolvingtheYear2000issue
to be approximately $340 million, as descr ibed below:
AsofOctober31,1999,wehaveincurredcostsof$327mil-
lion,
of which $92 million was capitalized.
Our objective is that our business operations run accu-
rately
and without disruption before, during and after
the calendar changes to the year 2000. However, due to
the general uncertainty inherent in the Year 2000 issue,
resulting in part from the uncertainty of the Year 2000
readiness of other parties, we are unable to determine at
this time whether the Year 2000 issue will have a material
adverse impact on our results of operations, liquidity and
financial condition.
Estimated spending for Year 2000 system
remediation over seven years (1994 to 2000);
this figure represents our mainframe and
centrally supported client server applications $164 million
Estimated business unit costs, including end-user
developed applications and embedded systems
(elevators, security access systems, etc.) as well as
transition management and contingency planning costs $82 million
Estimated capital costs for hardware and software $94 million
®Bank of Montreal is a licensed user of the registered trade mark owned by Cirrus System Inc.