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Misunderstanding the euro issues Back  
IBM’s latest survey of European companies finds that banking and financial services are not as far advanced in their euro preparations as previously thought, and that many Irish companies are still under misconceptions about what the euro changeover involves.
Many corporate and public sector organisation do not fully understand the business issues involved with the euro changeover, according to an IBM briefing held recently.

Ray Nulty and John Shuttlewoth who presented the seminar said businesses should expect significant commercial fallout and chaos from the euro changeover. They believe that there will be customer service issues for retail oriented businesses. There will also be unexpected levels of fraud and error and problems with cash flow, and they warned of disruption to supply chains, which could cause trading difficulties. The added that the euro changeover could cause commercial misjudgments and lead to incorrect pricing.

According to the seminar ‘Euro changeover will continue to wage inflation and both price inflation and deflation. Despite the Director of Consumer Affairs - some prices will increase or be passed on to the consumer in some form or other.’

‘Poor preparation of Irish companies will undermine the attractiveness of Ireland as a location.’

‘Shortage of resources both skilled and unskilled to assist with the changeover means that systems providers and integrators will not be able to fulfill their order books.’

IBM believes that few Irish businesses are adequately prepared for the challenge of euro changeover and said that even ‘pioneer’ companies are falling behind in their preparations because the effort and cost of full implementation has been greater than expected. Indeed, many Irish companies still believe that euro changeover is just an IT issue.

Some of the internal issues that IBM identified are low levels of mobilisation of staff; lack of process impact assessment; cost of compliance and definition of compliance; program management; time to prepare, and poor ERP support.

Meanwhile commercial issues that must be addressed include business restructuring to avail of opportunities and counteract threats, the issue of parallel imports, supply chain integrity and the UK position.

Common misunderstandings include the belief that preparation means using converters to show euro amounts and that the end of the transition period is end of June 2002. Other misunderstandings are the belief that Irish pounds can be used after December 2001 and that a company’s accountant will do the changeover for them. Another misconception is that prices can just be converted with no thought to cashflow /profit effects. There is no realisation of the need to reprice and to convert prices and that insurance policies may not provide cover because the euro is a ‘foreseeable event.’

The latest IBM survey of 304 European companies, conducted in May 2001 shows that companies are reporting that they are significantly less advanced in key areas like program and data conversion and testing than they said they would in the same survey last year.

Whilst euro projects are progressing, less than 20 per cent are complete and a significant number of companies expect to have to transfer resources from other IT projects to the euro project in order to be ready on time.

Particular help is needed with the migration of databases to the euro, advisory support and consultancy, implementing new hardware and application software or infrastructure change support.

According to the IBM survey just over 20 per cent of banking and finance industries will have completed their projects by July 2001, with many far less advanced than previously believed. More worrying though is the response from the insurance sector - where only 75 per cent estimate that they will have completed their euro conversion project by January 2002.

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