Financing in the EU
Financing in the EUForPlay Project: Financing in the EU
Forplay, Inc., is about to become a reality on the European market. Our company will base its distribution on strategic alliances with local mail order companies, while starting a global ad campaign targeted to an audience age 18 to 45.
While we don�t expect too many difficulties in converting and repatriating our funds, the
financial aspects of this operation will still have to face the upcoming European monetary integration. The new currency -- the euro - could significantly impact the way international business is conducted.
In January 1996, Andersen Consulting surveyed 169 companies throughout the European Union, finding that "nearly three quarters felt that deeper integration in the form of European monetary union (EMU) would enhance the single market and bring further benefits -- such as a more stable currency, lower inflation, lower interest rates, cost savings, efficiency improvements, a more competitive European Union (EU), and increased foreign investment."
There are benefits for companies outside the EU too. Business with Europe will be easier, and investment choices simplified through increased visibility and comparability of prices. Medium- and small-sized companies like Forplay, Inc., will have less trouble opening a bridgehead into an enlarged unified market, with fewer financial risks.
However, there are also many uncertainties. For example, which countries will join? Member states must meet criteria for economic convergence, and it is not certain how strictly these criteria will be enforced. Sluggish economic performance is giving finance ministers little room to maneuver. In some countries, notably the United Kingdom, a significant portion of the political establishment is hostile to the whole process, while in other countries, notably Germany, there is a reluctance to relinquish a strong national currency.
Adjustments for the new currency must be made between the start of 1999 and the start of 2002. As a business, we must begin planning now to minimize the cost of changing our information systems and administrative operations and address the legal issues. All software implementations will have to be consistent with the changeover needs, so decisions made in the IT field will be of paramount importance.
Risk management
The migration to the euro will be of concern to risk managers in the world's major banks. Long term, there are many inherent advantages to EMU for controlling financial risk, although there is a chance of "backing the wrong horse" by adopting a technical solution that is rapidly made obsolete by the market, technological advances, or unexpected legislation.
In the short term,...
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