Human Resource Management is the pattern of planned human resource deployments and activities intended to enable an organization to achieve its goals. HRM appears to be significantly linked with the overall effectiveness of the organizational performance. Quality HR strategies, policies and procedures are required for the organizations to address various practices like compensation management, industrial relations, performance management, training and development, talent acquisition and retaining, employee engagement etc. Implementing the best human resource practices is the preferred approach for improving quality and productivity in organizations and managing the risk aspects associated with it. It is necessary to understand the growing importance of risk management which is associated with the human resource practices like Outsourcing, Corporate Culture, Non-Monetary Rewards, Strategic Change, Performance Management, Organization’s Performance, Organization’s Ability to Pay, Personnel Management, IT Governance etc., which will have an impact on the production, financial and marketing decisions. This paper concentrates on the study of compensation management and the risk associated with it.