How one company is getting ready for the Euro

Global Finance, May 1998 by Essex, William

"The economics of making our current inhouse systems eurocompliant and Year 2000-compliant just don't make sense," says John Hawkins, group treasurer at automotive and aerospace components manufacturer LucasVarity in London. "What we're doing now is evaluating a new treasury management system for the whole of our internal treasury activity. We're looking at a new multilateral netting system and one or two other things. We have restructured ourselves internally and set ourselves up so that the work will be done and the system will be installed by the end of the year."

The other major task Hawkins must accomplish is to make arrangements with a bank to handle LucasVarity's euro cash management. Hawkins is leaning toward an American one. He explains that LucasVarity has "significant" operations in the United States, the United Kingdom, Canada, Germany, France, and Spain. In each country it employs one or two local banks to manage its cash, using each bank's proprietary software. The process is overseen by a global balance-reporting system administered by another bank. That's a minimum of seven banks, all to be called up via modem, usually at least twice a day. "Nine times out of 10 the arrangement works perfectly, but occasionally either the bank doesn't have your balance ready or there's noise on the line, and you can't get through, or you get bounced off." Hawkins wants to insure that he's not adding any further complications with the euro. "[Our choice] may be a European bank, but quite frankly, I'm not convinced that any of the Europeans are as far advanced in that area as the principal Americans," which he considers to be BankAmerica, Chase, and Citibank.

Hawkins believes that the adoption of the euro will eventually put an end to using local banks for cash management in Europe. He says that at first multinational corporations will simply stop using local banks for payments, and after a while they will no longer have them handle collections either. -William Essex