2020 CEO Survey: Richard Howes, Challenger

The year 2020 demonstrated how important a strong balance sheet was, says Challenger chief Richard Howes.

What are the three enduring lessons or changes to flow from COVID-19?

Capital management is as critical as ever. When the unexpected happens, having a strong, flexible balance sheet puts a company in a good position to withstand shocks. We knew that, but 2020 demonstrated how important it was.

Diversifying revenue streams is more important than ever. Again, we knew that, and our strategy has been to diversify revenue within both our life business and our funds management operations. 2020 just demonstrated how important it was to have options.

Working from home can be done efficiently. COVID-19 will change how people work forever. It’s a good thing.

How would you rate the shape of the Australian economy as we head into the new year?

The local economy has been remarkably resilient, and is in better shape than we thought would be the case six months ago. This reflects decisive action taken on the part of policy makers. I anticipate a growing focus on public debt levels and inflation risks, and these will have to be managed given the effective policy response.

What three reforms are needed to sustainably grow the economy?

With more than 700 Australians turning 65 years of age every day, there has never been a more important time to focus on retirement incomes. This was reflected in the Retirement Income Review on 20 November. The report made clear the importance of retirees having the confidence to spend their savings during retirement.

What are the three best growth opportunities for your company in 2021?

Our annuities business provides guaranteed income for life. There is much discussion of the role of retirement income strategies and making sure people don’t run out of money in retirement. Our products provide solutions to the key risks in retirement — longevity risk, market sequencing risk and inflation.

We expect to continue to benefit from the strategic pivot to diversify our distribution by focusing on the institutional channel. This, together with our successful growth in Japan, is seeing us continue to grow our life book in what would otherwise be challenging conditions.

Our funds management business is the fifth largest and fastest growing active fund manager in the country. As the economy recovers, the role of high quality active managers of the sort that comprise our business will continue to be apparent.

What impact will digital transformation have on your company?

Digital transformation is a very important feature of the evolving financial services landscape. It will be important that we continue to embrace it in adapting our business processes and serving our customers.

How would you rate business, state and federal government performance this year?

It has been a very tough year for everyone including governments. I applaud the decisiveness of the policy response federally and I also applaud where bipartisanship has helped us manage the health and economic impacts of the COVID-19 outbreak.