GOLD CREDIT RISK MANAGEMENT WINNER………Toyota Financial Services (TFS), based in Torrance, Calif., essentially exists to buy individual auto loans at a discount from its more than 1,200 U.S. Toyota and Lexus dealers. The discounted price Toyota Financial agrees to pay for the loans largely dictates the rate dealers can offer consumers and, to some extent, a dealer's ability to close a sale.

Following conventional corporate thinking, Toyota Financial previously had centralized control over credit risk and pricing in a headquarters committee of senior executives from risk, finance and line units. But it wasn't working. "Line units saw their best customers cherry-picked by competitors, while their input was disregarded," recalls Adrian Gruebler, national manager in Toyota Financial's corporate treasury. "Everyone agreed that our process was burdensome, inflexible and inefficient. The more decisions were automated, the less local information would or could be used."

Toyota Financial decided to turn the traditional tension between headquarters and field operations on its head to achieve nothing short of a financial breakthrough. It rescued its risk-adjusted return on capital (RAROC), which was tanking, by decentralizing. It took control over credit pricing decisions–and thus control over RAROC–away from a corporate committee and gave it to its 30 dispersed dealer sales and service offices.