By Joanne Wallen In spite of noises from the US that President Bill Clinton may suggest to his European counterparts that they postpone Economic and Monetary Union until some time well after the Year 2000, and uncertainty as to whether the current British government will lead its country into monetary union, British businesses should not […]
By Joanne Wallen
In spite of noises from the US that President Bill Clinton may suggest to his European counterparts that they postpone Economic and Monetary Union until some time well after the Year 2000, and uncertainty as to whether the current British government will lead its country into monetary union, British businesses should not be burying their heads in the sand and thinking they’ve got until after the next general election to start thinking about EMU, they should be acting now to prepare for the euro. The British Computer Society has published a booklet entitled Preparing for the euro – a practical guide for professionals and business managers, aimed at helping all types of businesses and institutions plan for what the society now seems to believe is the inevitable. On January 1 1999, many major European businesses and institutions will start trading in euros and expecting those that trade with them to be able to cope. German electronics giant Siemens AG, for example, has declared it will run its entire business throughout Europe, including the UK, in euros from January 1, 1999, and UK employees will be paid in euros, and then have to hope their banks will translate their salaries into local currency.
Knock on effect
So whether or not the UK eventually enters EMU, any company, government office, or financial institution that trades in any way with other European businesses will have to have systems that cope with the fundamental business changes that EMU will bring about. Think of your suppliers, customers, partners, investors, banks, the list is endless, and if any one in that chain is not prepared for EMU, there could be a serious knock-on effect for everyone else. That is why the US cannot, and is not simply sitting back and leaving Europe to get on with its own internal problems. Global business is here, and international trade via ever more open computer systems means just about everyone will be affected in some way. What the British Computer Society is urging everyone to do, and it means everyone, from the corner shop owner to the huge multinational, is to carry out an analysis to see exactly which parts of the business will be affected by EMU, and importantly, when. The society’s guide suggests the ‘doughnut’ technique, drawing a circle with your business at the center, and everyone you deal with radiating out from the center. The society suggests one chart is drawn for the UK ‘in’ EMU scenario, and another for the UK ‘out’. In either case, there are likely to be some parts of the business that will be affected by EMU, and these should be categorized according to when these will affect the business, now, later, unaffected, dependent on the counterparty and so on. Then businesses can look at which systems and business processes will be affected and when, and start to understand the scale of their problem. Sir Brian Jenkins, president of the British Computer Society and chairman of the Woolwich Plc building society, says there are still a lot of misconceptions about EMU and how it will affect both a company’s business processes and IT systems. Many companies believe they already have multi-currency systems, but the society questions, is the payroll or the general ledger multi-currency? Also, article 235 of the Maastricht treaty lays down very strict rules on currency conversion, which existing multi-currency systems would not include. Chris Rees, director of management consultancy Charteris Ltd and a member of the working party which produced the publication, stresses the euro is not just another currency. For a start, participants will be dealing in dual currencies during the transition period, so customers will have the option of whether to pay in euros or not. This will mean having option boxes on invoices, dual currency reporting and a whole chain of new business decisions and processes. Pricing will be affected. Items psychologically priced at say ú4.99, will not translate neatly into a similar euro price. Companies will have to consider changing pricing strategies or perhaps altering package sizes, and there is a potentially huge impact on competition. The euro will impact computer systems in the most basic ways. For a start, even the euro symbol, or symbols, will need to be displayed on screens, printouts, and mapped onto keyboards. All coin and note-operated machinery will have to be changed. All reports will have to be changed, as of course will every currency field in every program and all through the database. The guide suggests practical ways of managing the whole EMU project, and urges companies to act now. January 1, 1999 is a mere 13 months away. So will businesses be prepared, and will they be able to cope with EMU at the same time as dealing with the Year 2000 system changes? The society seems fairly optimistic that companies will be able to meet the deadlines if they start immediately, although it seems mainly to be basing its opinions on the progress to date of major banks, finance houses and very large corporates.
Likewise, the Bank of England, whose head of management services, Colin Mann, was also on the working party which produced the guide, also seems confident businesses will make it if they start now. The Bank says it has received a lot of calls for help and advice on EMU over the past year, and believes this is a positive sign that work is being done. However no one seems sure about the state of the UK’s medium and smaller businesses. John Ivinson, the society’s spokesman on EMU, thinks there is a feeling among small and medium businesses at the moment that someone will simply come along and tell them what to do about EMU. This is not the case, he says. Businesses have to take responsibility for themselves, and need to analyze the effects to their own business straight away. Unlike Year 2000, those involved in EMU are trying to play down the scare-mongering and play up the positive business benefits of getting ready for monetary union. Nevertheless, no-one can deny resources are going to be stretched to the limit with the two major events happening in tandem. One thing is certain, even the politicians can’t change the timetable for the Year 2000, but EMU could surely wait just a couple more years.