Not just a systems fix

Global Finance, May 1998 by Webb, Andy

om a systems point of view, Year 2000 looms far larger in corporate minds than the euro. But from a business point of view, says consultant Bob Baldoni, the euro is the far larger issue. A partner in Ernst & Young's risk management and regulatory practice, Baldoni says the euro is not just a systems fix, "where you handle the euro as a new base currency." Rather, it's a series of connected problems. Legal agreements and loan agreements need to be reviewed. Accounting and risk systems need to be changed. There are additional legal and tax issues in each country.

Just as important is pricing structure-both transfer pricing and customer pricing. Customers may want to pay in euros and he billed in euros. Once euro implementation is complete, moreover, there will be pricing transparency. "Customers can look across Europe and easily see whether a company prices its goods the same in all [European Monetary Union) countries," Baldoni says. In addition, no one knows how volatile the euro will be against other major currencies. The advent of the euro affects many different areas of the company, he notes, and there is need to pull all these areas together so that they can share information and coordinate their efforts. "The software vendors are giving support on the systems side," he adds. They can give your systems a euro fix. But there's no one to do it for your business itself but you."

Baldoni argues that being ready for EMU can be a competitive advantage. Not being ready could put a company at a competitive disadvantage. -A.W.