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Session No. AD248 The Euro is Here and it Means Business !

Session No. AD248 The Euro is Here and it Means Business !. Michael G. McKenna Globalization Strategist Global Products Group Sybase, Inc. mgm@sybase.com. One European Economy. ECU has already been around a while Economic potential comparable to U.S. New index currency, like U.S. Dollar

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Session No. AD248 The Euro is Here and it Means Business !

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  1. Session No. AD248The Euro is Here and it Means Business! Michael G. McKenna Globalization Strategist Global Products Group Sybase, Inc. mgm@sybase.com

  2. One European Economy • ECU has already been around a while • Economic potential comparable to U.S. • New index currency, like U.S. Dollar • Stability built in as part of Euro Member State Policy • One of the largest Government Bond Markets in the World • Expected increase in efficiency and GDP • Intra-European trade becomes “domestic” instead of “foreign”

  3. World GDP: euro vs U.S. and Japan

  4. Population: euro vs U.S. and Japan

  5. Share of World Trade

  6. Export: GDP Ratio

  7. Foreign Exchange Reserve ($B)

  8. World’s Currency Holdings

  9. Before 1999 : ECU 3 Year Transition Period Started January 1, 1999, 1 euro = 1 ECU Conversion rates fixed Multiple Currencies in Transition Period National Currency Unit (NCU) euro Currency Unit Payments in either - no obligation euro Time Line

  10. euro only in 2002 January 1, 2002 - euro Notes & Coins introduced Local currency still legal All payments must be in euros July 1, 2002 - National Currencies withdrawn A few of these will go away .... Euro Time Line (2)

  11. Euro Exchange Rates 1 EUR = 40.3399 BEF Belgian franc = 1.95583 DEM German mark = 166.386 ESP Spanish peseta = 6.55957 FRF French franc = .787564 IEP Irish punt = 1936.27 ITL Italian lire = 40.3399 LUF Luxembourg franc = 2.20371 NLG Dutch guilder = 13.7603 ATS Austrian schilling = 200.482 PTE Portuguese escudos = 5.94573 FIM Finnish mark

  12. Preference for Invoicing in Home currency National Currency euro Others? Currency Conversion Triangulation Rounding Errors Accounting Systems

  13. Adherence to Time Line Credit must be issued in euro if due after Jan. 1, 2002 Hedge Funds Elimination of exchange rate risk between participating countries Liability due to conversion errors e.g., ItLira to/from euro to/from DEMDon’t’ forget to change currency denomination! Legal and Administration Issues

  14. How to display the euro? Updated fonts Unicode: U+20AC ISO 8859-15: 0xA4 Adobe: new fonts Windows CodePages: 0x80 1250: Eastern European1252: Western European1253: Greek1254: Turkish1257: Baltic1255: Hebrew1256: Arabic1258: Vietnamese 874: Thai 1251: Cyrillic (0x88) GIF files (e.g., in HTML) Text: International Currency Code: EUR Euro Currency Display

  15. System Conversion • Big Bang Approach • Use existing system • Convert all data at once • Parallel Approach • Maintain data in NCU and euro • Phased Approach • Convert interfaces one at a time • New Systems Approach • Just start over!

  16. Demo - Big Bang Approach • Change all currency to euro with Control Panel • Convert all data • Use system in euros

  17. Conversion Strategies Assessment Re-engineering Testing Changeover

  18. Assessment • At the Enterprise Level: • Decide on the business strategy • Decide on the transitional strategy • Determine the impact on IT systems and decide on a timetable • At the IT Planning Level • Determine impact on IT systems. • Create change specifications for IT systems. • Plan the detailed assessment, re-engineering, testing and changeover strategy.

  19. Re-engineering • Identify where currency values are: • Screens • Databases • Business rule dependencies • Enhance and update applications: • Conversion and rounding routines • Screen interfaces • Database changes • New functions and interfaces

  20. Testing • New test data • Unit, regression and system tests • Current, historical and future data scenarios • Each scenario with a different mix of currencies

  21. Changeover • Time for natural fiscal break: • End of fiscal year • Jan 1, 2000 • June 30, 2001 • Prepare clients with advance notice • Keep a backup!

  22. Why Facilitate transition period P.O.S. Terminals Reduce confusion Costs Conversion of user displays Products Labels Reports Dual Currency Displays

  23. Every item Confusing display? Too much data? Use simple, elegant design Bottom Line Only show end-result in dual display Cash register receipts Invoices, etc. Must show what currencies accepted for payment Dual Currency Practicalities

  24. Product Order Select National Currency Display in euro and NCU Invoice Items listed in euros Customer profile indicates NCU Sub-totals in Dual Currency Demo - Dual Currency

  25. Example: Don’t use inverse rate: 1,000,000 NLG = 1,000,000 ÷ 2.20371 EUR = 453,780.22 EURwith inverse rate: 1,000,000 NLG = 1,000,000 x 0.453780 EUR = 453,780.00 EUR Conversion/reconversion problem NCU è euro ; euro è NCU 99 PTE / 200.482 è 0.49380... EUR è 0.49 EUR 0.49 EUR * 200.482 è 98.23618 PTE è98 PTE Problem grows with large lists Rounding Errors

  26. Best to conduct all business in one currency Display for information purposes only Use Triangulation when converting currencies Add “rounding” line item to match up sums Conversions, if possible, should be left to the Banking Sector Conversion Best Practices

  27. Triangulation National currency to National currency NCU1 to euro to NCU2 Use 6 significant figures for conversion rate Intermediate euro with maximum decimals Round up to nearest sub-unit of currency SQL: http://www.sybase.com/products/global/euro select @result = round((@amount/@rate1*@rate2), @round) Triangulation

  28. Convert all at once Assess and convert Convert “on-the-fly” Use data triggers and convert only when accessed Add conversion flag to show status Don’t convert Leave data as is Convert at Application Interface Legacy Data Conversion

  29. Multi-Currency Module (MCM) Free download at: http://www.sybase.com/products/global/euro Live feed off internet Tie USD, JPY, EUR, etc. Together Demo: e-Commerce with live local currency conversion Multiple Currencies

  30. SEEC, Inc., “The Euro Problem: Analysis and Approach”, White Paper, http://www.seec.com/products/whitepaper-euro.html Alejandro Moya, “IT Impact of the euro”, http://www.ispo.cec.be/y2keuro/euroit.htm European Commission, “Welcome to the Euro”, http://europe.eu.int/euro/html/entry.html European Commission, Directorate General II, “Euro Paper 22 : The Introduction of the euro and the Rounding of currency amounts”, 1998 ibid., “Euro paper 23 : Recommendations for the practical aspects of the introduction of the euro ”, 1998 ibid., “Euro Paper no.13 - Report of the expert working group on the technical and cost aspects of dual display”, 1997 ibid., “Euro Paper 3 - The impact of the Introduction of the euro on capital markets”, 1997 ibid., “Euro paper 1: External aspects of economic and monetary union”, 1997 Sybase, Inc., “Multi-Currency Module 1.0: Euro Converter”, http://www.sybase.com/products/global/euro Microsoft, Inc., “Microsoft Euro Currency Resource Center”, http://www.microsoft.com/euro/ Oracle Corp., “Oracle’s Euro Solution”, http://www.oracle.com/html/euro.html References

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