Contrast how risk is defined when allocating on a goals-based, liability-relative or asset-only basis

Each objective implies its own risk measure. For asset-only allocation, risk is volatility of portfolio return, or tracking error against a policy benchmark, sometimes supplemented by downside measures such as conditional value at risk. For liability-relative allocation, risk is volatility of the surplus (assets minus liabilities) or of the funded ratio, together with shortfall risk, the probability that assets fall below liabilities; a portfolio of long bonds matching liability duration may be volatile in isolation but low risk in surplus terms. For goals-based allocation, risk is the probability of failing to meet each goal within its horizon. The trap is calling cash risk-free for a pension plan: against long-duration liabilities cash creates large surplus volatility.