European Financial Aspects

Forplay, Inc. , is about to become a frankness on the European grocery store. Our comp some(prenominal) leave behind base its distribution on strategic alliances with local mail order companies, firearm broaching a global ad campaign targeted to an audience age 18 to 45. While we dont bear too many surdies in converting and repatriating our funds, the pecuniary aspects of this operation get out still get down to face the upcoming European pecuniary integrating. The innovative currency &8212 the euro could significantly partake the way international business is conducted.In January 1996, Andersen Consulting surveyed 169 companies throughout the European Union, finding that close to three quarters felt that deeper integration in the form of European monetary union (EMU) would enhance the wiz market place and bring further benefits &8212 such as a to a greater extent stable currency, discredit inflation, lower interest rates, cost savings, expertness improvements, a much competitive European Union (EU), and increased overseas enthronement. in that location are benefits for companies outside the EU too. worry with Europe pull up stakes be easier, and investment choices simplified through increased profile and comparability of prices. Medium- and small-sized companies like Forplay, Inc. , go forth overhear less trouble opening a bridgehead into an enlarged unified market, with few monetary jeopardys. However, in that location are withal many uncertainties. For example, which countries will join? part states essential(prenominal) meet criteria for economic convergence, and it is not certain how strictly these criteria will be enforced.Sluggish economic performance is tolerant finance ministers little room to maneuver. In most countries, notably the United Kingdom, a significant portion of the political foundation is hostile to the whole process, term in other countries, notably Germany, in that respect is a reluctance to reli nquish a sound national currency. Adjustments for the new currency must be do between the start of 1999 and the start of 2002. As a business, we must begin planning now to pick at the cost of changing our information systems and administrative operations and address the legal issues. every(prenominal) software implementations will have to be consistent with the changeover needs, so decisions made in the IT field will be of paramount importance. The migration to the euro will be of doctor to essay coachs in the worlds major banks. pertinacious term, there are many indispensable advantages to EMU for controlling financial risk, although there is a chance of backing the injure horse by adopting a adept solution that is rapidly made obsolete by the market, technological advances, or un researched-for legislation.In the short term, uncertainty and market volatility mean increased risk. harmonise to Bengt Bengtsson, SAS Institute European product manager for risk management so lutions, Companies should take this probability to reexamination and update their treasury operations, foreign exchange, and interest rate management. Flexibility in risk controlling systems and adequate hedge mechanisms will be vital. Liquidity risk will also come tall on the agenda as new products and funding possibilities (bonds, for example) become available in the euro.One of the keys to victor will be the separation of risk controlling functions from casual trading activities through a risk warehouse strategy. For a while at least, Forplay, Inc. will have to operate some form of dual accounting, with consequent extra burdens on our corporate chief financial officers (CFOs). In the meantime, CFOs will need supreme flexibleness within their ledger accounting systems and their financial consolidation and reporting systems, so they should take advantage of the introduction of the euro to review both. Two eccentric persons of organizations face challenges, says Richard Ki ng, SAS Institute European product marketing coordinator.The first is those with more than one type of transactional ledger system. They will need to consolidate and report in two currencies, based on information from several incompatible sources. Consequently they will need a solution that allows them to look at all relevant dimensions from any perspective, instantly. The second is any organization that has exchangeable on a single type of transactional ledger system but yet lacks flexibility when it comes to financial reporting, adds King.CFO imaginativeness from SAS Institute, which supports all ledger systems, gives full flexibility in reporting (including multiple currencies concurrently) while protecting existing investments. For us as marketers, the transition to the Euro also raises awkward issues that may seem insoluble to anyone exporting to the EU. For example, should prices be expressed in euros, national currencies, or both? In addition, even though our prices are e xtremely competitive, for many products there is a marked difference in pricing policies within different EU countries.With the introduction of the euro, prices will be more transparent and such differences more difficult to maintain. Forplay, Inc. should therefore be investing in market research and database marketing to modernize pricing and marketing strategies now to vitiate loss of market share and just the benefits of operating in a single market. Preparation will mean everything as further developments in the deployment of the euro unfold. A acute understanding of current systems, a pissed business plan, and flexible technology will mean continued business success &8212 in any language.