| Introduction | Assessing Strategies for Enabling Applications | |
This chapter briefly considers the general challenges of moving to the euro.
The challenges surrounding the changeover to the European single currency and the introduction of the euro are discussed at greater length in the document Preparing Financial Information Systems for the euro produced by the Directorate General of the European Commission, which we strongly recommend you to read.
The changeover to the European single currency introduces potential problems in systems that are used to process financial information. Clearly, the problems range from highly significant, strategic, business challenges to relatively minor effects such as how to conveniently deal with the inevitable, tiny rounding errors.
During the transition phase, such problems primarily concern the difficulties of storing and manipulating the euro and the national currency simultaneously, which affect data input and output, as well as interfaces between systems (some of which may not have converted to the euro yet). After transition, historical information still needs to be accessible and might need to be converted to the euro.
More generally, the need to convert between the euro and your national currency, and indeed to and from other currencies as well calls for strictly defined conversion procedures. For example, conversion rates must always be expressed as one euro to the national currency, to six figures of decimal that must not be truncated or rounded during conversions; and inverse rates must not be used. Additionally, amounts to be converted from one national currency to another must first be converted to the euro and then to the second currency (this is triangulation). The same situation applies where a participating national currency unit such as the Deutsche Mark or Franc is being converted to or from an external currency such as the Dollar.
Currency conversions afford particular scope for the sort of rounding and truncation errors that subsequently lead to difficulties in balancing the ledgers. Reconciling unequal balances results in a small difference that the user might need to allocate to a special account for rounding differences and subsequently monitor. Furthermore, conversion errors could also cause problems in systems that match transactions on the basis of their amounts.
You need to evolve a method for dealing consistently with currencies so as to minimize the risk of incurring accounting errors and consequently the cost of correcting them.
To overcome potential problems with moving to the euro, you need to consider three key stages:
To get the best overview of the euro problem, it's essential to complete stage 1 before proceeding to stage 2. Similarly, you should complete stage 2 before starting to fix application code. Giving in to the temptation to commence stage 3 when you've only partially completed the analysis in stage 2 could lead to expensive reworking later.
You might already have some rough ideas of how your business will respond to the challenge of EMU, and therefore how this will affect the requirements on your financial systems. If not, you need to consider the following approaches to transformation:
Realistically, some systems could be too old to be converted. Others might already be on the verge of obsolescence, due to the milennium. You would probably be considering rewriting these systems anyway, but the scheduling dilemma still exists.
At this stage, you are probably still establishing the scope of the problem and getting a feel for priorities. The areas you need to consider involve:
See the chapter Assessing Conversion Strategies for an explanation of how EuroSmart can help you establish the right changeover strategy for your applications.
Having established which systems you need to convert, you should begin to analyze the applications in some detail, to establish what impact the euro has on existing:
After the analysis, the next step is to apply consistent fixes to the areas affected, especially with regard to currency conversion.
See the chapter Analyzing Applications and Preparing for Conversion for more detail.
EuroSmart helps you gauge the impact of the changeover to the euro on your applications and helps you to bring a consistent approach to fixing any potential problems it could cause.
Among other things, you need to watch out for potential problems caused by:
You need to use triangulation for all applications that switch to the euro in order to convert any existing currency data files or databases that include currency data. In addition, if you intend your application to run in mixed currency mode during the transition period, you need to include a triangulation function in your application.
You may decide that a common triangulation subroutine is an appropriate way to handle these requirements. For this reason, EuroSmart includes sample triangulation code by way of illustration. The sample COBOL code includes a triangulation subroutine together with a simple PC demonstration program that allows you to enter an amount in one national currency unit and select another unit. It then uses the subroutine to calculate and display the amount in the requested national currency unit . The sample code can be found in the directory, EuroProduct\Revolve\Sample\Euro\Triangul.
You can use EuroSmart as part of the quality assurance and auditing process, to verify that an application was converted satisfactorily. You use EuroSmart for verifying only applications that have been changed by hand or by a product other than EuroSmart.
See the chapter Verifying a Euro Conversion for more detail.
There is at present plenty of debate about currency conversion: inverse rates, accuracy, triangulation and so on. Apart from the information provided, there are some web sites that provide interesting discussion; click here for a list.
In addition, the Bank of England publication Practical Issues Arising from the Introduction of the Euro provides further reference material.
Copyright © 1998 Micro Focus Limited. All rights reserved.
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| Introduction | Assessing Strategies for Enabling Applications | |