On the assumption that Ireland qualifies from the start, Economic and Monetary Union and the introduction of the single currency, the euro will mark a significant change in the environment in which Irish companies do business.
The elimination of currency conversion costs and exchange rate risk, transparency of prices across the EMU area, and generally lower interest rates in Ireland, will mean that Irish companies will operate under economic conditions significantly different from the present.
The first task for companies in preparing for EMU is to think strategically about what this new business environment will mean. Companies should make sure that they are ready to maximise every opportunity that the single currency may provide for Irish enterprise, as well as meeting its challenges. Planning is the key to ensuring a successful changeover and, with only 319 days to the start of EMU, it is vital that any company that has not already done so should begin planning now.
Whether you employ 20 people or 2,000 people, operate in a manufacturing or service industry and are a local, national or multinational organisation, the planning process is similar. The issues will vary from company to company, sector to sector, but timely and adequate preparation will be beneficial for all companies. It is important to remember the timetable for EMU when planning your company's changeover. EMU will begin on January 1st, 1999, when the euro will come into being in non-cash form and will be useable for non-cash transactions. Euro notes and coins will not be available for a further three years, so Irish notes and coins will continue in circulation. On January 1st, 2002, euro notes and coins will be introduced and Irish notes and coins will begin to be withdrawn. Within six months at most, legal tender status will be withdrawn from Irish notes and coins and the changeover to the euro will be complete.
It is also important to remember that key customers and/or suppliers may well play a crucial role in influencing when a company should change over to the euro. Such issues need to be addressed now, otherwise companies may face unnecessary surprises come January 1st, 1999, when EMU begins.
As part of the Government's EMU Business Awareness Campaign, which is managed by Forfas, a five step planning process to assist companies with their euro preparations has been developed. The first step is to collect as much information on the relevant issues. Apart from the Business Awareness Campaign, there is now a wide variety of sources for this information, including banks, business associations and representative groups. The second step is to ascertain the strategic or commercial impact of the changeover on your business - how EMU will impact on how you do business with your customers and suppliers, on the products you sell and on your existing and potential competition. To facilitate such an assessment, the campaign has prepared a Business Impact Analysis that will enable you to make a quick and straightforward evaluation of the likely commercial impact of EMU on your business.
Once this analysis has been completed, the next step is to look at the functional implications of the changeover on the day to day operations of your business. This will require an examination of your core business functions. In the areas of production, marketing, sales and distribution, the possibility of new markets and/or increased competition will need to be considered, along with the issue of transparency of prices across the EMU and its impact on your business.
There may well be improved opportunities for sourcing raw materials, components or services or you may wish to review your current distribution network.
Production processes may also need to be adapted. Information technology will be a significant area to consider. Look at all systems that are used to process financial information in one or more of the participating currencies. The resources required to adapt existing systems will need to be assessed, as well as when that adaptation needs to take place so as to ensure that systems are ready in time.
It may be worth considering whether or not to purchase new systems/software rather than upgrade an older system. In the area of accounting and finance, issues to be considered include deciding on when and how your company accounts, payments, invoices and tax returns should be changed over to the euro. Find out when your customers and suppliers will be invoicing or expect to be invoiced in the euro. Remember, the banks and building societies will process lodgements and payments expressed in either pounds or euros, regardless of which of these the customer account is denominated in, from January 1st, 1999, but you should talk to your financial advisors now to see what specific arrangements they will have in place.
Consider also the human resource implications of the changeover on your business. Staff training will most likely be required to deal with invoicing, cash handling, accounting systems and customer queries. The timing of such training will also be important, particularly so for the retail sector with the introduction of euro notes and coins on January 1st, 2002. Legal issues will also need to be addressed, although the continuity of contracts will be provided for by EU legislation. Contracts involving non-EU countries should be carefully examined.
Once you have identified the functional implications of EMU for your business, the fourth step is to prepare a plan for making the necessary changes. The plan should set out clearly what the specific changes are; when they need to be implemented; and who will be responsible for implementing them. This will be your "blueprint" for managing the changeover process.
The fifth step is to test and implement the changes you have identified in your plan: remember to allow time for testing so that you can be sure your plan will produce the desired results. Following these steps you should ensure that your company's changeover to the euro will be as smooth and effective as possible.
Yvonne Cullen is assistant project manager of the EMU Business Awareness Campaign which is managed by Forfas. A summary leaflet outlining the key planning issues for business can be obtained by calling 1890 208 308. Further information is also available on the campaign's web site at www.emuaware.forfas.ie
