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Thursday, 18th April 2024 |
| Solbes gives the Irish an accolade |
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| While financial services are generally perceived to be preparing well for the euro changeover there are has been an overall delay in starting euro changeover plans, and there are still hurdles in data conversion to overcome. Roisin Hogge reports. |
Euro changeover fever has well and truly begun, as highlighted by a spate of recent surveys and the national euro preparedness conference held in Galway in February.
On the logistics side the distribution of fifteen billion notes and fifty billion coins to over 300 million people in twelve countries accustomed to twelve different currencies is an unprecedented logistical and communication challenge. With less than a year to go before we have euro notes and coins in our pockets, preparations are proceeding apace throughout the euro area. Governments have set a number of common principles, which form the broad framework for the national changeover plans.
In his address to the Loughrea national euro conference EU Commissioner Solbes highlighted the progress of the work on the introduction of euro notes and coins on 1 January 2002. He outlined the key tasks to be achieved:
• The bulk of cash transactions should be made n euro by the end of the first fortnight in 2002.
• The period of dual circulation of the former national currencies and the euro should last at the maximum for two months.
• Financial institutions, and other key players, can be provided with euro notes and coins well ahead of 1 January 2002, to facilitate the changeover. This front-loading must not however, lead to the euro being put into circulation before that date.
• Member states can make limited quantities of euro coins available to the public during the second half of December 2001, to enable them, and in particular vulnerable groups, to familiarise themselves with the new coins
Solbes however pointed out that Irish companies were ahead of the curve in terms of preparedness.
‘Many large firms are now reasonably well prepared, but smaller ones are tending to underestimate the scale of what has to be done and the risks involved in leaving the preparations to the last minute. From 1 January 2002 on, all firms must be able to carry out all their transactions in euros: concluding contracts, keeping accounts and making tax returns. From that date on. All book-money transactions must be in euros and most cash transactions too will quickly be in euros even though the national currencies will be circulating for a short period after 1 January.’
‘Turning to the results of the most recent euro-wide survey conducted by the Commission, the picture is broadly encouraging. Senior managers in 62 per cent of companies in the euro area now believe that they will be capable of managing a complete changeover to the euro on time. In Ireland, the figure is considerably higher at 72 per cent.’
One particular concern of the Commission about the changeover to the euro has been the capacity to adapt IT systems.
Euro uptake
The survey to which Commissioner Solbes referred is the fifth quarterly review of the use of the euro by Eurobaromter. This report shows that use of the euro is still not widespread. By comparison with the third quarter, companies have increased their national payments in euros by six points in value terms (from 24 per cent to 30 per cent) and almost three points in terms of volume ( from 3 per cent to 5.8 per cent) but overall use is modest. Over 32 per cent of international payments are in euros. There has also been little progress with regard to accounts in euros, which have reached 3.9 per cent. The volume of accounts being opened in euros is expanding and has now risen above one account in ten.
The EC believes that firms, particularly smaller ones, need to step their preparations. Too often preparations are seen solely from a technological angle, with strategic and commercial aspects (such as reformulating prices, relations with suppliers and customers, and staff training) taking a backseat.
‘Companies need to take the steps required to be able to issue and process their invoices solely in euros from 1 January 2002. This means that they must change their accounts systems well before the end of the year’, says Erkki Liikanen, the Member of the Commission responsible fore enterprise. At present in nine of the twelve participating Member States less than 1 per cent of companies have switched their accounts to euros.
Banking and insurance
Turning specifically to the preparedness of the Irish financial services sector, another survey, this time carried out by Cap Gemini Ernst & Young, found Irish banking and insurance industries in line with their European counterparts. This survey gauged the extent of EMU preparedness of large retail organisations across different sectors in the eurozone, and revealed worryingly low levels of preparation. Only 19 per cent of retailers declared their euro project to be completed.
A fourth of business across Europe think that they can keep internal accounts and bookkeeping in present currency units until after 1st January 2002, whereas a number of countries have announced that there will be penalties for not keeping internal accounts and records for taxation purposes in euro in 2002.
Slightly more than two thirds of the retailers dealing with credit cards indicated that they intend to accept these in the present national currency units after 1 January 2002. This clearly demonstrates that they seem to be unaware of the fact that the national currency will cease to exist as legal tender for all non-cash transactions after 31 December 2001.
‘Our survey shows two worrying trends,’ said LizAnn Doyle of EuroTransformation Services at Cap Gemini Ernst & Young, in Dublin. ‘Firstly, organisations seem to overlook the business impact and complexity of their eurochangeover. We believe that they need to move quicker if they are to be ready on 31 December 2001 and exploit the new opportunities.’
‘Secondly few companies have recognised that the euro transformation and e-business programmes will impact the same areas. They could be overlooking the benefits of linking these large-scale projects, which both call for a major reassessment of existing processes.’
Doyle highlighted the issues raised by the survey for Irish banks and insurance companies - two of the sectors covered by the report.
‘Banks are the primary players in the eurochangeover, if they don’t get it right then the whole system will collapse.’ As a consequence, she said, the banks and the financial services sector in general are ahead of the pack in their preparations.
But the conversion of accounts to the euro as base currency, and the decision on how each payment (like credit cards, debit cards etc) method is going to be converted remains an issue for Irish banks. Doyle also identified the logistics of getting the euro out there as a challenge for the banks themselves.
With the insurance companies’ business being less immediate than the banks and of a less cash-dependent nature the obstacles raise by the changeover are slightly different. Data conversion and keeping values the same following the conversion
According to Doyle Ireland’s euro preparedness is only average and lags behind leaders like France.
An area highlighted by Doyle which all Irish companies need to address, including the well advanced is the area of continuity planning. What to do if the systems fails during the crucial changeover period. ‘If things go wrong then your business could be at risk.’
While this may seem to be over planning for the event, having a back up system to cope with unexpected failure is a good idea. This could be even more important if your business could be affected by a supplier of customer’s lack of preparation.
Doyle advises companies to identify their key processes, and to decide what kind of fall-back position could be adopted should there be a problem in the plans. |
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| Article appeared in the February 2001 issue.
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