Plain English
Before an authority ranks you, rank yourself. Look at every material intercompany flow, score it for likelihood of challenge and size of exposure, and spend your budget on the top of the list rather than spreading it evenly.
Technical definition
A process of evaluating controlled transactions against risk indicators — loss-making entities, low-substance jurisdictions, intangible migrations, financing flows, documentation gaps — to prioritise remediation and provisioning.
Why it matters
Tax authorities run exactly this exercise on your CbC report. Doing it first is the difference between preparing an answer and improvising one.
How it works in practice
- 01Inventory material controlled transactions by value.
- 02Score likelihood: documentation status, substance, historic challenge, jurisdiction behaviour.
- 03Score impact: adjustment, penalties, interest, secondary adjustments.
- 04Plot and prioritise; decide remediate, document, or seek an APA.
- 05Feed conclusions into the uncertain tax position provision.
Worked example
Prioritisation in practice
Six flows are reviewed. Two are large financing balances with no credit analysis and no documentation — high likelihood, high impact. Four are routine service recharges, well documented. The budget goes to a credit rating study and Chapter X documentation for the financing, not to refreshing the service benchmarks a year early.
Common mistakes
- Reviewing only the transactions someone already worries about.
- Scoring likelihood without reference to the specific jurisdiction's audit behaviour.
- Producing a heat map that never becomes a work plan.
Audit red flags
- No owner assigned to any remediation action.
- Provisions not updated after the assessment.
Documentation & data
Documents to hold
- Risk register with scores, owners and dates.
- Link to the uncertain tax position workpapers.
Data you need
- Transaction inventory by value.
- Documentation status by entity.
- Audit history.
Who owns this internally: Group tax, reported to the audit committee.
Jurisdiction notes
- OECD
- The Draft Handbook on Transfer Pricing Risk Assessment sets out indicators authorities use.
Notes by role
CFOs & finance leaders
Ask for the register once a year, with owners and dates. It is the cheapest tax risk control you can implement.
Frequently asked
- How often should this be run?
- Annually as a light refresh, with a deeper review after any restructuring, acquisition or major audit.
Sources & status
- Secondary source
Draft Handbook on Transfer Pricing Risk Assessment
OECD, 2013
- Our interpretation
Scoring approach and prioritisation matrix
This glossary, 2026
Reference material only, not advice on a specific fact pattern. Reviewed 2026-06-30.
Careers
How this shows up in the job
Risk assessment work gives you a view of the whole group quickly. Ask to own the register.
Careers in transfer pricing