FIVE part process to manage the change over to EMU has been devised by Arthur Andersen consultants for Forfas.

The "planning framework" is based on the findings of a confidential study on the practical implications of EMU for Irish enterprises commissioned by Forfas. The work was undertaken at the request of the Minister for Enterprise and Employment, Mr Bruton and will be formally published soon.

Major Irish companies such as the Smurfit group and Guinness Ireland, as well as senior executives from banks, a US multinational and a number of Irish small and medium enterprises took part in the study which led to the planning framework.

"Whether you employ 20 people or 2,000 people whether you operate in a manufacturing or service industry and whether you are a local, national or multinational organisation, you should follow a similar planning process to ensure that your organisation is fully prepared for the change over to a single currency," the framework says. And the support of top management is essential in leading the preparations.

The steps to the euro change over from assigning responsibility to performing analysis and implementing change are highlighted in the panel (top right).

The functional implications should be considered for six key areas:

. marketing, sales & distribution;

. production, product development and purchasing;

. accounting and finance;

. information technology;

. human resources; and

. legal.

Overall, companies need to assess their exposure to monetary union. Companies which sell primarily to the public, for example, face a major task in educating staff to help customers. Meanwhile, those which have a few major clients may need to cater for a customer base which demands to deal exclusively in euros from 1999 on. Businesses handling large volumes of cash will have to plan carefully.

The introduction of the euro has major implications for marketing and sales. A significant risk from EMU will be faced by companies which compete primarily on price, the framework says. Price transparency will increase cross border competition, but also open lucrative overseas markets to keenly priced Irish products. So companies which hope to attract customers primarily on the basis of low prices are likely to find the going tougher.

For companies whose products rely on particular "price points", the introduction of the euro will mean change. Under current exchange rates a £4.99 bottle of wine for example, would be converted to 6.81 euros.

"Would the new psychological price point emerge at 5.99 euros or 6.99 euros?" the framework asks.

In order to maintain profit margins while adjusting to new price points it might be necessary to look at production and product development. Companies may need to redesign product size or quality. There is likely to be increased consistency of products across Europe to comply with customer demands for price consistency. New labelling equipment may be required.

Companies need to discuss with their suppliers and customers the when and how of the change over.

Retailers and others selling directly to the public must consider the display of prices, and particularly the tricky issues which will arise in the change over period between 1999 and 2002. Directives on this issue have still to be finalised, but companies will have to plan for a period of dual pricing in both euros and national currencies. They are likely to have to display price per unit in many cases.

Companies need to assess the accounting and finance implications. The timing of the change over will be a crucial decision. Businesses will be given the option of switching from national to euros any time between 99 and the start of 2002, the latter date being the latest for the introduction of the actual notes and coins.

Companies need to decide when they are going to start accepting payments, making payments, invoicing customers and drawing up accounts in euros. For large European banks the cost of the changeover could be up to £40 million, according to some estimates, while for SMEs it may be around £750,000.

The tax implications of EMU for most businesses should be limited, according to the document. Tax charges could arise, however, where the payer is taxed on gains/losses on foreign currencies on a realised basis, and holds foreign currency bank balances which become converted into euros.

Most expenses incurred by trading companies in preparing for the euro should be deductible provided they are clearly not capital in nature.

The report warns of the major implications for treasury operations. In the run up to the introduction of the euro and the fixing of exchange rates, there may be volatility in exchange and interest rates due to potential speculation over the final euro rates and over which countries will participate.

After the introduction of the euro, many companies dealing largely with the British market may face particular difficulties if, as appears almost certain, sterling is not a founder member. The rate at which the pound will enter against the other euro currencies must be determined, with obvious implications for, competitiveness.

Conversion costs for information technology could be and be included in future IT strategies and budgets. As well as the change to the "euro", companies are recommended to bear in mind the impact of the year 2000 on their systems.

The IT impact will be essentially a software issue. Any programmes which deal with "values" will need to be adjusted, including accounting, payroll, order processing and the like. Some hardware, equipment may need to be adapted, in particular cash registers and vending machines.

There are widespread expectations of IT skill shortages and businesses need to consider whether they will need outside consultants.

It has been estimated that for a medium sized company with a single site installation, conversion will take approximately nine to 12 months. For a multi site large company the estimate is 18 to 24 months, and for large banks And very large corporations, the estimate is 36 to 48 months.

However, these are estimates and the IT conversion timetable will vary considerably from company to company.

Employee training issues must be considered in areas such as cash handling and conversion rates, invoicing, accounting systems and dealing with customer enquiries. Meanwhile, the company's lawyers will need to look at the legal implications for contracts.

Overall businesses should bear in mind that EMU will present at least as many new opportunities as it will threats and could be a useful catalyst for a review of strategic focus and direction, the report, says. But it clearly shows that leaving preparations until the last minute will be too late.