Euroquake Preparedness

Dec. 21, 2004

In December, I was awakened at 4:15 in the morning by a 4.1 earthquake. Normally this wouldn't be any big deal, except that the epicenter of this temblor was just three miles from my house. It felt as if the Defense Dept. was carrying out nocturnal nuclear-weapons testing beneath San Francisco Bay. Ironically, an event we think of as extremely precipitous -- an earthquake -- is actually the earth's way of effecting gradual change. Pressure builds beneath the earth's surface until a shift occurs, releasing pressure. Over time, as in millions of years, mountains rise and continents shift. That "big bang" in the middle of the night is merely a half inch of the next Mt. Whitney or Mt. Denali in ascendance. The best that those who live in earthquake country can do is to prepare. Bolt homes to foundations. Add lateral strength to wood-frame houses by nailing plywood to interior basement framing. Lay in a supply of food, water, and batteries. Keep a wrench beside the natural-gas shut-off valve. In some ways, the Year 2000 threatens to be an earthquake for business, except that we know when it's coming and can prepare. Corporations have been racing to get ready for the millennium date change for some time. That's because there was -- and still is -- lots of work to be done. But the actual changing of the date is a big-bang event. It's not going to happen over time, it's going to take place all at once. You're either prepared or you're not. Another seismic event business has been bracing for is the European Monetary Union's move to a unified currency. Once again, the timing of the conversion was no secret -- everyone knows the transition began Jan. 1. But what you may not know is that until the transition period is over in mid-2002, the euro is a virtual currency only. This means the euro will not be a coin or a paper currency that people will hold in their hands and use until that date. It will, however, be a common measure of value in use until then. Thus, products will be priced in euros as well as in lira, deutsche marks, francs, and pounds. Likewise with monetary calculations. Consumers and businesses will be able to pay and be paid for goods in euros, but only electronically. Eurocash will remain a thing of the future until 2002. Why not change all at once? Why not make eurocash available at the same time as the electronic euro? In the business computing world, the big-bang approach is an accepted strategy for converting from one system to another. Of course, this method requires that staff be trained in how to use the new software and how to deal with any changes in business processes associated with the conversion. A large California bank involved in an acquisition executed successful big-bang changeovers of major checking and ATM systems over separate weekends. Teams of systems and operations staffers swept into the bank's facilities on Friday evening, laboring until Sunday night to install, test, and implement the cutover to the new systems. Employees came in on Monday morning and immediately began using the new systems. Conversely, an athletic shoe company did a big-bang conversion to a new warehouse-automation system and the result was disastrous. When the complicated new equipment failed, warehouse employees ended up manually sorting through shipments from its factories and repackaging shipments to dealers. By contrast, the euro will have three and a half years of phase-in. The idea is to enable people to get used to the idea of a common currency before making it mandatory. In this case, it's a sensible strategy because it gives individuals and businesses a chance to get their minds, methods, and systems accustomed to the new currency. That way, by the time the euro finally displaces other currencies, business will have solid experience with it, the bugs will be worked out of the new systems supporting the shift, and the cultural change won't be so daunting for the hundreds of millions of people affected. Clearly, the overall impact of the move to the euro is far reaching. Getting everything changed to handle the new currency will be expensive and time-consuming for business. But at least people know when the change is coming. That's more than you can say about an earthquake.

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