Businesses in the EU and the wider world are grossly ill-prepared for a potential collapse of the eurozone, wrongly expecting that they will have plenty of time to prepare for the conversion of one or more countries to a new national currency.
That is the warning of Gartner analyst David Furlonger.
Speaking at Gartner's Risk and Security Management Summit in London today, Furlonger warned that even if just one country, such as Greece, were to withdraw from the euro and re-adopt a national currency, the execution would be sudden, leaving many companies unprepared to handle the consequences.
Even for US companies, where the belief is that eurozone difficulties do not apply, many organisations will nevertheless be affected. "There could be global implications as a result of changes in the market – counter-parties struggling to pay bills, for example," said Furlonger.
When Gartner polled IT leaders earlier this year, almost two-thirds said that their organisations had no plans in place to deal with a worsened eurozone crisis – and the situation clearly hasn't got any better since then, he added.
"You need to understand both the macro and micro effects of a change in the European environment," said Furlonger. The first "pain points" will inevitably be felt in the banking system.
"The macro effect largely stems from shifts in Target-2 – imbalances between central bank funding across different European nations. If there is a break-up of the euro then certain central bank transfers will need to be made or maybe cannot be made, in respect of balancing all of the flows in Europe. That will have knock-on effects in terms of how financial institutions in Europe can be funded," he said.
He added: "We already know that liquidity in the marketplace is absolutely terrible. Our banking clients [at Gartner] tell us that lending has dropped precipitously over the last several months and liquidity is very hard to come by and much more expensive than even during the time of the global financial crisis [in 2008-2009]."
At a micro-economic level, payment system volumes will fluctuate widely and wildly across multiple channels. "That could be across your internet commercial systems, it could be the ATM network, it could be in respect of what MT-100 payments you are making, mobile payments and so on."
The internal systems of many mainstream financial institutions will struggle to handle the spikes, warned Furlonger. As a knock-on effect, corporate payments and receivables might be affected. "If you are in a space where you rely heavily on retail payment activity, such as ATMs. These may be impacted first," said Furlonger.
With Twitter, Facebook and other social networking tools, information about ATM closures will travel fast, enabling panic to travel equally quickly.
In payments, organisations should prepare for:
* Significant slowdowns and partial failures in wider payment networks;
* Blockages of payment systems during peak processing times;
* Restrictions on ATM withdrawals (causing a knock-on effect in retailing especially).
The level of planning required to cover all eventualities is huge, warns Furlonger, and will require contingencies prepared across finance, contract management, human resources, IT, the supply chain, and corporate communications.
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