Wiggins confirmed earlier this month that he will not race the Tour de France, as Sky build their roster around reigning champion Chris Froome.
Froome and Wiggins - the 2012 yellow jersey winner - have not raced together since the start of 2013 as their relationship has soured and Riis cannot believe Sky have allowed the situation to deteriorate as far as it has.
As a sporting director, Riis has won two Tour de France titles with Carlos Sastre triumphing in 2008 and Andy Schleck claiming the yellow jersey two years later.
The Danish former professional cyclist is convinced Sky are making "a huge mistake" by not including Wiggins in their Tour de France roster.
"First of all, I would like to say that Sky is not my team, fortunately," Riis told Danish TV channel TV2 on Friday.
"There's no doubt that I would have taken a different approach. It's a bit sad to see that it would take that turn and let it go that far. It would certainly not be acceptable on my team.
"Sky can of course do whatever they want but I strongly feel that it is a huge mistake if they do not have Wiggins."
In 2012, Froome played a key role in helping Wiggins win the Tour with many claiming the Kenyan-born cyclist could have triumphed himself.
Froome infamously rode away from Wiggins on a climb on stage 11 in 2012 before sitting up to let his fellow Brit catch up, and afterwards the younger rider claimed he thought the team had given him the freedom to attack.
Last year, Wiggins missed out through injury and Froome triumphed, and the latter will again be Sky's main man this year when the Tour starts next month.
The Tour de France will start in Leeds on July 5 and Riis believes Tinkoff-Saxo's leading man - Alberto Contador - could be a contender for the Danish team.
"I have not seen Contador better with us," Riis said.
"Whether he has been better than that, I could not comment on, but while he has been with us, there is no doubt that it is the strongest I've seen him."