When most people think of risk management, they picture cybersecurity threats, supply chain disruptions, or compliance issues — not the compensation programs used to attract, engage and retain a company’s workforce. But compensation, especially for privately owned companies, sits squarely at the intersection of operational, financial, and reputational risks.
From an enterprise risk management (ERM) perspective, HR leaders should see compensation not just as a tactical function of their areas of responsibility, but as a potential source of risk — and a huge opportunity for strategic impact.
Compensation touches everything related to talent management: company culture, attraction, retention and financial health. If your compensation practices are outdated, misaligned, or noncompliant, you're not just risking increasingly low levels of employee engagement, but you could be setting the stage for legal trouble, turnover spikes or budget volatility. In ERM terms, compensation is a risk that often flies under the radar until something breaks. That’s why a compensation risk assessment should be on every HR leader’s radar — not as a “compliance box” to check, but as a critical input to your overall risk management strategy.
Understanding compensation through a risk lens
Assessing compensation risks
Turning risk awareness into action
Conducting a compensation risk assessment is your chance to be proactive. You’re not waiting for a fine, an audit or a talent exodus to tell you something’s wrong. Instead, you’re digging into the data, assessing vulnerabilities, and building a framework that supports smart, risk-aware decision-making.
This means looking closely at how compensation plans and programs are designed and structured, how decisions are made and how outcomes are tracked. Are your salary bands current and market-aligned? Do your incentive plans support the company’s risk appetite and long-term goals? Are pay decisions documented and explainable? If the answer to any of those questions is “I’m not sure,” that’s exactly the kind of ambiguity compensation risk assessments are designed to resolve.
The best part? This isn’t just about minimizing downside. When done well, a compensation risk assessment becomes a strategic tool. It helps your company attract the right talent, mitigate risks, control costs more predictably and build a culture of fairness and transparency. It puts HR in the driver’s seat — not just supporting the business but actively shaping its resilience and success.
Content disclaimer
This Grant Thornton Advisors LLC content provides information and comments on current issues and developments. It is not a comprehensive analysis of the subject matter covered. It is not, and should not be construed as, accounting, legal, tax, or professional advice provided by Grant Thornton Advisors LLC. All relevant facts and circumstances, including the pertinent authoritative literature, need to be considered to arrive at conclusions that comply with matters addressed in this content.
Grant Thornton Advisors LLC and its subsidiary entities are not licensed CPA firms.
For additional information on topics covered in this content, contact a Grant Thornton Advisors LLC professional.
Tax professional standards statement
This content supports Grant Thornton Advisors LLC’s marketing of professional services and is not written tax advice directed at the particular facts and circumstances of any person. It is not, and should not be construed as, accounting, legal, tax, or professional advice provided by Grant Thornton Advisors LLC. If you are interested in the topics presented herein, we encourage you to contact a Grant Thornton Advisors LLC tax professional. Nothing herein shall be construed as imposing a limitation on any person from disclosing the tax treatment or tax structure of any matter addressed herein.
The information contained herein is general in nature and is based on authorities that are subject to change. It is not, and should not be construed as, accounting, legal, tax, or professional advice provided by Grant Thornton Advisors LLC. This material may not be applicable to, or suitable for, the reader’s specific circumstances or needs and may require consideration of tax and nontax factors not described herein. Contact a Grant Thornton Advisors LLC tax professional prior to taking any action based upon this information. Changes in tax laws or other factors could affect, on a prospective or retroactive basis, the information contained herein; Grant Thornton Advisors LLC assumes no obligation to inform the reader of any such changes. All references to “Section,” “Sec.,” or “§” refer to the Internal Revenue Code of 1986, as amended.
Grant Thornton Advisors LLC and its subsidiary entities are not licensed CPA firms.
Trending topics
No Results Found. Please search again using different keywords and/or filters.
Share with your network
Share