The euro will be introduced gradually from 1999 to 2002. On 1 January 1999 the rates of conversion between the euro and the participating national currencies will be irrevocably fixed and the euro will become a currency in its own right. At this date enterprises can begin operating in euro. On 1 January 2002 the new euro banknotes and coins will be put into circulation in substitution for banknotes and coins in the old national currency units.
During the transition period two different currency units will be used within the same Member State. Financial information systems will have to be prepared in order to deal with this unique situation.
Planning the changeover of information systems to the euro is not just a matter of dealing with the practical issues and consequences. For many enterprises there will be strategy level issues that warrant attention, issues that will fundamentally affect the way an enterprise conducts its affairs. Changes in the business environment, such as the introduction of the euro, can change the functionality that is expected from information systems. In this document discussion of the strategy level issues is confined to a brief description of how they may influence the preparation of the information systems. The strategic considerations should be taken into account before modifying those systems for the use of the euro.
To prepare an enterprise’s information systems for the introduction of the euro it is important to establish which information systems are affected by the euro. The basic rule is that:
Only systems that are used to process financial information in one of the participating national currencies can be affected by the euro changeover.
This means that many information systems, principally those dealing with non-financial information, will not be affected by the euro at all.
The changeover to the euro is often compared to the year 2000 problem, probably because both are related to information systems and occur at roughly the same time. The basic rule is:
Systems that use dates, directly or indirectly, can be affected by the year 2000 problem.
This means that hardware and software that is not used to process financial information can still be affected by the year 2000 problem.
Since most financial information systems also use dates, they must be reviewed for problems associated with both the changeover to the euro and the year 2000. Additionally, the preparations for the introduction of the euro, on 1 January 1999, and the year 2000 will necessarily need to be made at the same time. Therefore some enterprises have therefore decided to combine preparation for both issues in order to avoid modifying the same information systems twice. When setting up separate euro changeover and year 2000 projects, enterprises should take into account that the projects are sometimes closely related, because:
a. For both projects an information systems inventory must be made;
b. Decisions to fix or to replace information systems in view of the euro changeover and year 2000 problem cannot be taken independently;
c. Both projects relate in part to the same information systems.
However, there are good reasons for managing the subsequent phases of the projects separately, because:
a. The two projects are fundamentally different. The year 2000 problem is largely a technical problem in information systems. Whereas the euro changeover requires additional functionality in information systems, and also affects an enterprise in other areas;
b. The combined project could be of unprecedented size and complexity, and may become difficult to manage
c. Deadlines for the euro and year 2000 projects are different (a delay in the euro IT project should not lead to a delay in the year 2000 fix).
In planning for the euro enterprises need to address the following five aspects that are essential for a successful changeover:
a. Euro project team – The euro changeover of information systems is a complicated process that should not be underestimated. Therefore, all but the smallest enterprises need to set up a euro project team that can guide the them through the changeover process;
b. Define the scope and nature of the changeover problem – Describing the existing systems and determining the quality of those systems is extremely important for determining the changeover strategy;
c. Determine priorities and strategy – In setting priorities the importance of the information systems and their complexity must both be taken into account. Furthermore. enterprises need to decide which changeover strategy is most appropriate – a "big bang" changeover, a gradual changeover, or implementation of new information systems;
d. Dependency on third party software – Enterprises that rely on third party software have little control over the functionality, timing, quality, and price of the "euro compliant" software. Therefore, they must reduce the associated risks to acceptable levels;
e. Training employees.
The introduction of the euro has already been described as a unique event in history. It is this uniqueness that causes most of the problems. The introduction of the euro is unprecedented in the following respects:
a.During the transition period two different currency units will be used within the same Member State:
b. At a certain point in time enterprises will have to switch over to the euro completely. The historical financial information, denominated in the national currency unit, that an enterprise still needs after the changeover to the euro, must be converted to the euro unit (conversion problem).
In order to deal with these functional problems several strategies are suggested in this document.
There is a wide range of technical details that need to be taken into account when modifying information systems for the euro:
a. Rounding Converting amounts between the euro and participating currency units will unavoidably cause rounding differences. The effects of these rounding differences vary from being merely a nuisance to being able to bring information processing to a halt;
b. Interfaces between systems. Developing interfaces between systems that use different currency units is often more complicated than expected because of rounding differences.
Many enterprises have linked their own information systems to those of other enterprises and they must decide together how and when these systems are changed over to the euro.
Finally, special care needs to be taken to avoid information systems accidentally combining amounts expressed in euro with amounts expressed in the national currency unit (data pollution).
c. Converting historical data. Many financial information systems store the same information more than once. Conversion of historical data requires that all instances of the same data are converted in exactly the same way, otherwise unpredictable results and errors may occur.
Conversion from the national currency unit to euro involves rounding to the nearest cent. Multiplication of amounts that have been rounded results in multiplication of the rounding differences.
Some financial information may be stored in the "description" fields of a database, converting such information to euro may often not be possible.
Two methods exist for converting amounts denominated in another participating currency unit to euro, each of which offers its own advantages. As these methods produce different outcomes, enterprises need to decide which method they prefer and then use it consistently;
d. Decimals. Financial information systems that were designed to work with a national currency unit without decimals will need to be modified in order to work with euro cents;
e. Thresholds. Very often financial information systems use threshold values that define the actions of the system. These thresholds must be converted to euro to avoid unexpected actions by the information system;
f. Displaying two currencies. Displaying information in two currency units at the same time can be difficult because the amount of space (number of columns) available on computer displays and printed reports is limited.
g. Spreadsheets. It is impossible to design a utility that can automatically convert spreadsheet models to euro. Therefore the preferred option will often be to rebuild the spreadsheet model, rather than trying to convert an existing spreadsheet model manually.