I wouldn't personally say he's at an enormous disadvantage, rather the risk increases for equal reward.
My advice is to remember your fundamentals and aim for a counter hit, and the best way to do that is to aim to kill a step or a high.
Sieg's CH KND game is pretty good, as is his damage, but you have to be prepared to risk damage to do it - IMO the best up close tools are:
(Highs)
Throws - I cannot stress enough how good Sieg's throw game is at close range: good damage, great range, good okizeme - ABUSE THEM
6[A] for a good KND and a mixup rather than punishment on block, this move also has some serious right RO potential, which has won me more than a few matches before.
A is -2 on guard and is a good setup for 3(B) or step ~ whiff punish etc.
ag:A doesn't really halt an opponents offence here as generic 2A is a threat to any extra pressure, but it gives a mindgame situation, a sweet KND on hit and a little bit of breathing room.
(Mids)
3(B) is your all purpose damage dealer - against most of the cast, the world doesn't end if it gets blocked so the reward is easily worth the risk and its Tech crouch begins early (around frame 6, I think) so use it to cheat frames against characters with strong high pressure games - especially against characters with paticularly good throws. It is good to mixup with throws as you need your opponent to twitchduck for this to be effective - good thing his throws are awesome really <3.
B6 is your alternative to 3(B) at midscreen - it respaces, is safe and gives mixup on hit... Most of the time. I would only use this myself in a clutch situation where I don't need 3(B)'s bigger damage output or against bitches like Sets or Sophie (55 Damage from a blocked 3(B) - what the hell is that?! >=( ) Bear in mind it has no tech crouch so use it when you get an offensive oppertunity in tandem with throws
4K is your B6 by an edge for FWD RO on CH, but the tech crouch starts late (frame 11) - try to cheat frames with this and you will die... HOWEVER it is very satisfying if you CH a 6BB happy Amy, paticularly for RO =D
3A if a wall is to your right.
(Lows)
Sieg's close range lows are ass so I wouldn't really bother unless you need quick damage, but 1K is i15 and gives +2 on CH so its usable I guess - has no tech crouch though...
On a side note, AA will respace the opponent to tip range if the idiot doesn't duck the 2n'd hit, so against low level players, this is a good answer to pressure.
Basically, you rely on throw/mid mixups to respace, but NEVER be afraid to fish for CH at point blank with Siegfried - it poses him bigger risk, but its also where you find his biggest damage. If that doesn't work out - try to mindfuck them, use your stance game from things like WS(B) and 22(B) if you get an opening... Oh, and whiff punish with 1B if you step something.
Hope that helps =)