Since coming to the United States from France in 1986, Gabriel Bousbib has devoted his energies to helping companies manage the risk generated by their derivatives operations.
As the head of Reuters America's newly formed risk management unit, the 31-year-old Mr. Bousbib is now charged with the task of overcoming the perception that the wire service pioneer is a novice in the field of risk management.
Through a number of acquisitions over the last three years, though, the company has purchased a product line that will make his job easier.
"Things are different in Europe," he said of the market's perception of Reuters. "There Reuters has been successful in building a customer base among financial institutions."
To some, the name Reuters conjures up images of carrier pigeons and primitive telegraph machines passing information between European financial centers.
In recent years, however, the Reuters America division of the 145-year- old company has expanded beyond its traditional news focus.
The crossover into risk management was a logical step, said Mr. Bousbib.
"Reuters is a dominant provider in the foreign exchange transactions business," he said. "This was a natural extension of Reuters' business."
The decision to get into this business has become even more relevant given the events that have rocked the derivatives industry since 1993. Besides the collapse of Barings PLC and other highly publicized problems, the Securities and Exchange Commission has recently issued rules directing companies to disclose more about their off-balance-sheet activities.
A frequent speaker on risk management issues, Mr. Bousbib learned the ropes of risk management working with the global swaps group at Merrill Lynch Capital Markets in the late 1980s. There he helped monitor and hedge the financial firm's swaps derivatives position.
During that period, he applied his trading experience to help found Myca Inc., a software company specializing in trading and risk management systems. The company, which was sold in late 1991, designed and developed a derivatives support product used by some 50 institutions worldwide.
After a four-year stint with CBM Group, a New York-based management consulting firm, he accepted the challenge of making Reuters a trading-room name in the field of risk management.
A risk management system accomplishes two goals, said Jacques Longerstaey, a vice president in J.P. Morgan & Co.'s risk management unit. First, it gives management a clearer picture of the overall risk a firm is taking. Second, it helps meet regulatory requirements.
"Technology has been important in accessing high quality and timely data - not only on positions, but also on markets," Mr. Longerstaey said. "And it helps to apply the analytics to get an estimate of this risk."
Reuters' decision to enter the risk management market evolved over time, but its entry into the market was quick and decisive. Since 1993, the company has been busy buying companies both in Europe and in North America with expertise in this area.
The Reuters offering best known among U.S. institutions is the Sailfish risk measurement system, developed by Sailfish Inc., a company Reuters acquired in two transactions beginning in 1993. At nearly the same time, Reuters bought Effix Systems, a Paris-based developer of risk management software. Its Kondor-Plus system was being used primarily by European banks to monitor their foreign exchange, fixed income, asset-backed securities, and money market portfolios.
Reuters America already has a client list that includes J.P. Morgan & Co., BankAmerica Corp., and Mobil Corp.
But an even larger number of institutions do not own systems that give meaningful information about their risk positions, Mr. Bousbib said. As a result, he said, the company's timing in getting into the industry could not be better.
Reuters' hands-off approach to its subsidiaries has given its new units financial and staff support, while allowing them to remain small, flexible, and efficient, he said. So far, this strategy has paid off with the development of the company's new Deal Manager system.
Designed for corporate treasury departments or regional banks - which generally have small trading desks in foreign exchange - the system is able to track deals and monitor trading positions. Already, the system is used by some international banking giants like Britain's Standard Chartered Bank.
"We think this product will be very attractive to small players," Mr. Bousbib said.
To be sure, Reuters is not alone in targeting this market.
Just last week, Cats Software, a leading developer of risk management systems, announced it was buying LOR/Geake Bock Associates of Los Angeles and Palo Alto, Calif. The $8 million deal will give the combined company a leg up in providing both market risk and credit risk management.
Rod Beckstrom, a former Morgan Stanley swaps trader who is the founder and chief executive of Cats, said the Palo Alto company's Carma system uses certain Reuters products. In particular, he said, Reuters' Tecknekron Software System, which was purchased last year for "well over $100 million, " is an important factor in getting price information.
"We see them as an industry partner," said Mr. Beckstrom.
Still, Reuters has started testing its own risk management systems in the United States to overcome its European focus. The tests, which have centered on U.S. branches of European banks and some U.S. money-centers, have revealed some blemishes. In particular, some trading desks found the system was not set up in a way they were accustomed.
Nonetheless, Mr. Bousbib said the response so far has been positive, and he expects the number of favorable reviews to climb. And as older risk management systems come to the end of their useful lives, he thinks Reuters' all-in-one approach will win the day.