In which two ways can the risk objectives of a DB pension plan be stated?

A defined benefit (DB) pension plan's risk objectives are fundamentally linked to its liabilities—specifically the promised benefits to participants—and the contributions required from the plan sponsor to ensure those liabilities can be met over time. This reflects the plan's responsibility to ensure it can adequately fund its obligations to pensioners while managing the risks associated with investment performance.

By focusing on liabilities, the plan assesses the risk of underfunding its obligations due to various factors such as interest rates and life expectancy changes. Contributions are critical as they represent the cash flows that the sponsor must commit to the pension fund, which could be adjusted based on funding needs and investment performance. Therefore, stating risk objectives in terms of liabilities and contributions effectively captures the core financial challenges and strategic management needs of a DB pension plan.