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Euro will cost firms $86B
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December 11, 1998: 10:54 a.m. ET
Survey: IT and lost profits cost firms $51M each; many are unprepared
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LONDON (CNNfn) - Preparing for the introduction of the euro will cost businesses $86 billion, according to a survey of large companies based in Europe.
The bill amounts to $51 million per company, according to consultants KPMG. But despite the massive drain on company profits, many have yet to reflect the cost in their budgets and forecasts.
The launch of the euro now is just three weeks away, but many large companies are woefully unprepared for the new single European currency, according to a survey of more than 300 firms headquartered in Europe, each employing more than 5,000 people.
The lack of preparedness is such that some companies face being in breach of the law. A third of respondents couldn't confirm their EMU systems would be able to handle conversions to and from European currencies through the euro. This process, known as triangulation, is required by European union legislation.
Companies estimate that the euro will hit their profitability by an average of $29.8 million each. The average total project cost of EMU adaptation will be $21.5 million per company.
Spending on information technology alone will cost $17.2 million, far greater than most companies' total spending on Year 2000 compliance.
KPMG Consulting partner Michael Littlechild slammed the lack of preparation. "In the short term, EMU is likely to have a negative impact on profitability," he said.
"Companies recognize this but have failed to reflect it in budgets or forecasts. Accordingly they face a turbulent transition period for which many are ill-prepared."
Only one in three companies said they expect a short-term rise in profitability as a result of the introduction of the euro, though three-quarters believe it will bring long-term earnings benefits. 
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KPMG
European Union
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