Every year, more than one million Canadians return from Europe— many of them laden with coins worthless outside the issuing country. For those travellers, and for the many Europeans who cross the increasingly invisible borders of the European Union for business and pleasure, life is about to become simpler. Instead of constantly using different currencies, they will be able to use the euro. On Jan. 1, it will be introduced as the new common currency for 11 of the 15 EU countries (the holdouts are the United Kingdom, Sweden, Denmark and Greece).
But for all its proclaimed advantages, the euro has become just one more problem for the people who manage the complex computer systems that keep business humming. First, the Year 2000 crisis, now this. “It’s another software natural disaster,” predicts Joyce Boland, a senior research analyst in London with the Connecticut-based consulting firm Gartner Group. The biggest potential for disaster lies in being unprepared. Many companies, particularly smaller firms with limited opera-1 tions in Europe, have not given much thought to the euro’s intraduction, even though it is just a few months away. “I think most companies have left it rather late,” says Boland. Adds Neal Oswald, a partner in the international capital markets group at Ernst & Young in Toronto: “They should be thinking about it right now.” Some companies may have been lulled into the false sense that the euro is a problem that can wait until closer to the deadline of July 1,2002, when national currencies in the euro zone will be taken out of circulation. But even during the phase-in period, the euro will be a fact of business life. The very transition, with its accompanying need to handle both the euro and national currencies, adds to the problems. “The complicating issue is that commerce can be conducted in either,” says John Truman, the Royal Bank’s senior vice-president for customer information and delivery solutions. “It’s not as simple as adding another currency to a table.” The opening price of the euro will be based on
the Dec. 31,1998, closing price of the ECU, a basket of European currencies traders have used since November, 1993. From Jan. 1, transactions from one euro -zone currency to another will have to be priced against the euro. Changing lire for marks will mean first converting the lire into euros, then to marks. Companies with limited operations that had intended to wait may find that cus-
tomers or suppliers are making the switch immediately, and many large European companies have already announced they will conduct business in the euro as of Jan 1.
Making the conversion can be expensive, with the greatest cost being borne by European companies or companies that operate across the euro zone. Gartner Group and IBM have both estimated total conversion costs at upwards of $220 billion. For Canadian companies, the costs will generally be lower, but that depends on what needs to be done. Although the big Canadian banks will have to rework their trading and payment systems, among others, they do not have large European retail operations and automatic teller networks that need retooling. Still, both the Royal Bank and the Canadian Imperial Bank of Commerce, the two biggest, are facing price
tags in the $10-million range. “We’re looking at all our systems,” says Geza Tatrallyay, the Royal Bank’s senior vice-president for risk management in London who heads up the company’s euro-readiness group. Both the Royal and CIBC expect to meet the October targets they have set to have their systems ready. “We’re pretty confident about the program,” says Richard Read, an executive director of CIBC World Markets in London. Some of the changes are relatively mundane, like redoing the electronic tote boards-that the banks use to display foreign exchange rates, or adding the symbol for the euro to software and keyboards.
Working on the more complex problems related to the Year 2000 bug—known in the trade as Y2K—may have helped the Royal prepare for the introduction of the euro because the bank has already made inven-
tories of its computer systems, Tatrallyay says. But, says Truman, the euro issue also complicates the work being done to solve Y2K. “It’s diverting resources.”
Many companies preparing for Y2K have installed so-called enterprise applications from software suppliers such as Germany’s SAP that integrate all a company’s transactions into a single system. Chris Thorne, director of Canadian software research for International Data Corp. Canada in Toronto, says those firms will find it relatively easy to make the euro transition. Still, says Boland, upgrades to new versions of such applications can be time-consuming and expensive. “I just wish people wouldn’t be so complacent,” she says. After all, time—and the euro—wait for no one.
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