I know it's not best practice, but due to an acquisition, the accounting team is wanting to post directly to the system Retained Earnings account. What is actually the risk here? It's just potentially FX stuff isn't it? And if the entry is in the sub's base currency, it shouldn't make a difference?

Transactions posted to RE are not revalued as far as I know (currency exchange rates). And even if you use a separate GL account with the same set up as the system RE account, the subsidiary base balance will still be translated using the consolicated historical exchange rates assuming the parent subsidiary has a different base or functional subsidiary.