Kristin Moyer

David Furlonger here…..So the wires are hot again as the dollar falls to new lows.

The UN called today for a new reserve currency that the Saudi central bank governor has denied holding talks with China and other countries about dropping the use of the dollar for pricing oil, regardless of press commentary to the contrary that appeared in the Independent newspaper.

Does any of this matter to IT professionals?

Apart from the macro economic and political ramifications, the impact on IT professionals will be muted. This is not the same situation as the euro conversion. The impact on IT from the introduction of the euro was significant and involved changing devices, accounting platforms, pricing, reporting etc. The loss of the dollar as a reserve currency will be far less onerous on IT departments. The dollar will not, in the near future, disappear as a currency and US domiciled firms will still use the dollar as a currency of record.

Of greater impact may be the change in dominance of the dollar as the predominant denominator of asset value. If oil, for example, started to be priced in euros or Rubles or Yuan; if major assets or services were priced in alternate currencies, eg outsourcing services priced in Rupees – then IT executives would have to be aware of the ramifications that such changes would have on their budgets and investment criteria, including the potentially greater currency risks associated with arguably less liquid currency alternates.

Undoubtedly the increased use of alternate currencies will potentially stress payment systems, document management, reporting and decision analytics tools. As counterparts get used to measuring and managing new valuations for goods and services there may well be delays in processing invoices, payments, statements etc and corporate treasury and accounting departments may initially lack the data and agency services to analyze and adequately report the effects on the supply chain.

Political posturing and journalistic noise is one thing. However, the market is the final arbiter of change. Remember when SDRs were attempted to be introduced and traded in the 1970s. Where was the liquidity? The market will decide whether the dollar is still the major force it once was. Until then the best course of action in this year-end planning and budgeting season is to:
• Run a scenario analysis on the sourcing and investment implications for non-dollar denominated budgets
• Check system interface flexibility for currency conversions
• Check data quality provisions and accessibility to non-dollar denominated currency sources and historical records
• Check reporting capability for conversion that effect limits, macros, risk calculations, pricing systems etc
• Check GUI displays for their ability to accommodate display changes
• Check 3rd party contract agreements for currency conversion and price impacts as well as the ongoing validity of the contract in the event of material change

If all else fails – use that old City of London trading tip: when you see something printed as a headline in the newspaper do the opposite, ie the dollar could now represent a great buying opportunity…

In the interim we would love to hear from our clients – how will the dollars demise impact your business? Is currency conversion part of your strategic plan? Would more in-depth research on the impact of currency fluctuations address some of your 2010 challenges? Comment on this blog or email: david.furlonger@gartner.com

Related Published Gartner Research:
• Executive Leadership and Innovation: Critical Issues at the Intersection of Business, Information and Technology
• The Future of Money
• The Financial Market Crisis: Storm Clouds Over the Euro