Monitoring performance and security metrics across your vendor partnerships is necessary for keeping your vendor risk management (VRM) program agile. The goal is to track your vendors based on different assurance parameters and proactively address undesirable changes. As highlighted in Deloitte’s 2023 global TPRM report, this track-and-react approach helps you build sustainable VRM practices and reinforce trust in your partnerships.
This guide will explain what VRM metrics are and how to find suitable ones for your organization. We’ll also help you:
- Identify the key metrics (KPIs and KRIs) to track
- Set up a VRM dashboard to achieve better visibility and control over vendor risks
Understanding VRM metrics
VRM metrics are key indicators that provide data-centric insights into the health and reliability of your third-party relationships. They also help you fine-tune vendor procurement and risk mitigation decisions. You can use these metrics to enforce quality control and ensure that risks like service disruptions, compliance violations, and cybersecurity threats do not escalate into critical issues.
To maintain a balanced overview of vendor performance and third-party risk exposure, you need to track the following metrics:
- Key performance indicators (KPIs)
- Key risk indicators (KRIs)
{{cta_withimage5="/cta-modules"}}
Vendor KPIs vs. KRIs
Vendor KPIs and KRIs serve distinct yet complementary roles in building a resilient and responsive VRM system.
KPIs measure a vendor’s efficiency, quality, and consistency in delivering the contracted products and services. The following table identifies the three common categories of KPIs:
Vendor KRIs, on the other hand, are risk-based metrics that assess vulnerabilities associated with vendor relationships. They serve as early warnings of issues that could harm your business. Here are the three common categories of KRIs you can track:
10 VRM KPIs to track
The following are some standard KPIs that can help you measure how well a vendor meets their obligations and contributes to your business goals:
- On-time delivery rate: The percentage of deliveries made on or before the scheduled date, which indicates the vendor’s reliability in meeting deadlines.
- Quality of deliverables: A composite score of the vendor’s service quality based on predefined criteria.
- Cost savings achieved: A value reflecting the vendor’s contribution to reducing operational expenses, rework costs, etc.
- Response time to incidents: The average time the vendor takes to respond to and resolve performance-related mishaps.
- Rate of return or defects: The frequency of returned goods or defective services, which points to the consistency and reliability of the vendor’s output.
- Vendor availability rate: The percentage of time the vendor’s services or products are available to meet your operational needs.
- Compliance with service level agreements (SLAs): The extent to which the vendor adheres to the agreed-upon SLA commitments.
- Percentage of contract fulfillment: The percentage of contract terms and deliverables successfully completed by the vendor.
- Innovation contribution: The vendor’s ability to introduce new ideas, technologies, or processes that enhance your core competencies.
- Customer satisfaction index: The satisfaction ratings provided by your organization’s end-users (or internal users) regarding the vendor’s products or services.
{{cta_simple17="/cta-modules"}}| Webinar: Vendor risk management
10 VRM KRIs to track
When evaluating the potential risks in your vendor network, consider tracking the following essential KRIs:
- Regulatory compliance violations: Instances where vendors fail to meet regulatory standards or compliance frameworks, posing legal and reputational risks.
- Number of security breaches: Frequency of unauthorized access incidents within vendor systems, which indicates cybersecurity vulnerabilities.
- Financial stability ratios: Metrics like debt-to-equity and liquidity ratios that indicate a vendor's financial health and ability to meet contractual obligations.
- Frequency of service disruptions: Instances of unplanned interruptions in vendor services, which increase operational risks.
- Vendor dependency ratio: The degree of reliance on a vendor’s product, infrastructure, and expertise for a project’s success, indicating vulnerabilities like delays and lock-ins.
- Criticality of vendor services: The impact of vendor-provided services on your core operations like production or sales.
- Vendor management personnel turnover: Turnover rates in key vendor management roles that impact VRM stability.
- Vendor’s business continuity: Evaluation of a vendor’s readiness to maintain operations during a crisis.
- Legal disputes: A vendor’s history of past or current legal conflicts with other customers or organizations and potential liabilities.
- Vendor’s market reputation score: Industry perception and reliability of vendors based on performance reviews.
How to determine what VRM metrics to track
It may not be realistic to track multiple VRM metrics as that would be too resource-consuming. You can focus on KPIs and KRIs that align with your organization’s specific needs and goals. Here are some factors that may impact your choice:
- Data security: If most of your vendors are SaaS providers, prioritize metrics related to the protection of sensitive information and systems.
- Resource utilization: If your goal is to manage budget constraints and maintain profitability, consider resource-oriented metrics to monitor cost savings and vendor dependencies.
- Process efficiency: For organizations looking to streamline operations and reduce downtime, focus on metrics like response time to incidents and on-time delivery rates.
- Team productivity: If your organization relies on vendors for critical internal functions, you may want to evaluate metrics such as quality control scores and adherence to SLAs to ensure vendors are not hindering your team’s performance.
- Vendor risk tier: Consider monitoring higher-risk vendors with a more comprehensive set of metrics.
{{cta_withimage5="/cta-modules"}}
Setting up your VRM dashboard
You can track VRM metrics at regular intervals—or you can do so continuously. A VRM dashboard is crucial for real-time KPI and KRI tracking, enabling your risk team to remain fully aware of potential disruptions or dips in performance.
Your options to set up a VRM dashboard depend on the type of VRM software solutions you access. However, here are some general steps you can follow:
- Benchmark against industry standards.
- Customize metrics for your business needs.
- Configure alerts for critical updates.
Step 1: Benchmark against industry standards
Industry standards offer a baseline for measuring vendor performance and associated risks, so your VRM metrics should reflect established quality, security, and compliance benchmarks.
You can also draw from KPIs within frameworks that apply to you—for example, ISO 9001 for quality management and ISO 27001 for information security.
Step 2: Customize metrics for your business needs
Tailor VRM benchmarks for your organization’s size, strategic goals, and regulatory ecosystem. You can choose to have tighter or more lax metrics for different vendor risk tiers. For instance, here’s a sample set of KPIs you can track for high-risk vendors:
- 99.9% service uptime
- Zero compliance violations and security incidents annually
- 95% on-time delivery
- 100% adherence to proposed SLA practices
- All incidents resolved within one business day
Step 3: Configure alerts for key updates
Configuring VRM software alerts supports continuous monitoring of vendor risks and ensures timely responses to potential issues. Assign responsibility for setting up these alerts to a dedicated VRM program admin.
Determine who should receive alerts based on the type and severity of the KPI or KRI deviation. For instance, IT security teams should be notified of data-related incidents, while updates about service disruptions should first go to operations or vendor managers. You can tier alerts by urgency, with high-priority issues triggering immediate notifications and less critical updates sent as daily summaries.
{{cta_testimonial5="/cta-modules"}}
Leveraging technology for efficient VRM
Technology plays a critical role in tracking VRM metrics efficiently. For instance, you need data collection tools to gather, visualize, and analyze KPI and KRI data from multiple sources, such as ERP and CRM platforms.
That’s why many VRM solutions today are bolstering their capabilities with AI, machine learning, and process automation technology. These tools reduce manual effort and promote efficient metrics tracking in several ways, such as:
- APIs to collect relevant data from other platforms.
- Machine learning and predictive analytics to identify trends in vendor data.
- Automation-enabled vendor due diligence and risk assessments.
- AI-powered insights to improve your VRM program.
- Dashboards offering real-time visibility into key metrics.
Continuously monitor VRM metrics with Vanta
Tracking KPIs and KRIs is a non-negotiable part of building a reliable working partnership with vendors. You can ensure your tracking processes are efficient and watertight with Vanta’s Vendor Risk Management solution.
Vanta removes manual work across your VRM program—from onboarding to risk assessment and remediation. Here are some of its key features that boost efficiency:
- Centralized vendor inventory (with automated onboarding)
- Customizable vendor risk assessments with auto-scoring
- Built-in rubrics to calculate vendor risks and analyze access controls
- Comprehensive visual dashboard with real-time insights into tracked metrics
- Automated vendor security reviews and suggested follow-up tasks
- 300+ integrations to create a cohesive VRM workflow
- Logic-based tests for continuous monitoring of controls
Watch our webinar to see Vanta in action. Or request a custom demo to get started!
{{cta_simple5="/cta-modules"}}
Running a VRM program
Vendor risk management metrics: Complete guide to KPIs and KRIs
Running a VRM program
Monitoring performance and security metrics across your vendor partnerships is necessary for keeping your vendor risk management (VRM) program agile. The goal is to track your vendors based on different assurance parameters and proactively address undesirable changes. As highlighted in Deloitte’s 2023 global TPRM report, this track-and-react approach helps you build sustainable VRM practices and reinforce trust in your partnerships.
This guide will explain what VRM metrics are and how to find suitable ones for your organization. We’ll also help you:
- Identify the key metrics (KPIs and KRIs) to track
- Set up a VRM dashboard to achieve better visibility and control over vendor risks
Understanding VRM metrics
VRM metrics are key indicators that provide data-centric insights into the health and reliability of your third-party relationships. They also help you fine-tune vendor procurement and risk mitigation decisions. You can use these metrics to enforce quality control and ensure that risks like service disruptions, compliance violations, and cybersecurity threats do not escalate into critical issues.
To maintain a balanced overview of vendor performance and third-party risk exposure, you need to track the following metrics:
- Key performance indicators (KPIs)
- Key risk indicators (KRIs)
{{cta_withimage5="/cta-modules"}}
Vendor KPIs vs. KRIs
Vendor KPIs and KRIs serve distinct yet complementary roles in building a resilient and responsive VRM system.
KPIs measure a vendor’s efficiency, quality, and consistency in delivering the contracted products and services. The following table identifies the three common categories of KPIs:
Vendor KRIs, on the other hand, are risk-based metrics that assess vulnerabilities associated with vendor relationships. They serve as early warnings of issues that could harm your business. Here are the three common categories of KRIs you can track:
10 VRM KPIs to track
The following are some standard KPIs that can help you measure how well a vendor meets their obligations and contributes to your business goals:
- On-time delivery rate: The percentage of deliveries made on or before the scheduled date, which indicates the vendor’s reliability in meeting deadlines.
- Quality of deliverables: A composite score of the vendor’s service quality based on predefined criteria.
- Cost savings achieved: A value reflecting the vendor’s contribution to reducing operational expenses, rework costs, etc.
- Response time to incidents: The average time the vendor takes to respond to and resolve performance-related mishaps.
- Rate of return or defects: The frequency of returned goods or defective services, which points to the consistency and reliability of the vendor’s output.
- Vendor availability rate: The percentage of time the vendor’s services or products are available to meet your operational needs.
- Compliance with service level agreements (SLAs): The extent to which the vendor adheres to the agreed-upon SLA commitments.
- Percentage of contract fulfillment: The percentage of contract terms and deliverables successfully completed by the vendor.
- Innovation contribution: The vendor’s ability to introduce new ideas, technologies, or processes that enhance your core competencies.
- Customer satisfaction index: The satisfaction ratings provided by your organization’s end-users (or internal users) regarding the vendor’s products or services.
{{cta_simple17="/cta-modules"}}| Webinar: Vendor risk management
10 VRM KRIs to track
When evaluating the potential risks in your vendor network, consider tracking the following essential KRIs:
- Regulatory compliance violations: Instances where vendors fail to meet regulatory standards or compliance frameworks, posing legal and reputational risks.
- Number of security breaches: Frequency of unauthorized access incidents within vendor systems, which indicates cybersecurity vulnerabilities.
- Financial stability ratios: Metrics like debt-to-equity and liquidity ratios that indicate a vendor's financial health and ability to meet contractual obligations.
- Frequency of service disruptions: Instances of unplanned interruptions in vendor services, which increase operational risks.
- Vendor dependency ratio: The degree of reliance on a vendor’s product, infrastructure, and expertise for a project’s success, indicating vulnerabilities like delays and lock-ins.
- Criticality of vendor services: The impact of vendor-provided services on your core operations like production or sales.
- Vendor management personnel turnover: Turnover rates in key vendor management roles that impact VRM stability.
- Vendor’s business continuity: Evaluation of a vendor’s readiness to maintain operations during a crisis.
- Legal disputes: A vendor’s history of past or current legal conflicts with other customers or organizations and potential liabilities.
- Vendor’s market reputation score: Industry perception and reliability of vendors based on performance reviews.
How to determine what VRM metrics to track
It may not be realistic to track multiple VRM metrics as that would be too resource-consuming. You can focus on KPIs and KRIs that align with your organization’s specific needs and goals. Here are some factors that may impact your choice:
- Data security: If most of your vendors are SaaS providers, prioritize metrics related to the protection of sensitive information and systems.
- Resource utilization: If your goal is to manage budget constraints and maintain profitability, consider resource-oriented metrics to monitor cost savings and vendor dependencies.
- Process efficiency: For organizations looking to streamline operations and reduce downtime, focus on metrics like response time to incidents and on-time delivery rates.
- Team productivity: If your organization relies on vendors for critical internal functions, you may want to evaluate metrics such as quality control scores and adherence to SLAs to ensure vendors are not hindering your team’s performance.
- Vendor risk tier: Consider monitoring higher-risk vendors with a more comprehensive set of metrics.
{{cta_withimage5="/cta-modules"}}
Setting up your VRM dashboard
You can track VRM metrics at regular intervals—or you can do so continuously. A VRM dashboard is crucial for real-time KPI and KRI tracking, enabling your risk team to remain fully aware of potential disruptions or dips in performance.
Your options to set up a VRM dashboard depend on the type of VRM software solutions you access. However, here are some general steps you can follow:
- Benchmark against industry standards.
- Customize metrics for your business needs.
- Configure alerts for critical updates.
Step 1: Benchmark against industry standards
Industry standards offer a baseline for measuring vendor performance and associated risks, so your VRM metrics should reflect established quality, security, and compliance benchmarks.
You can also draw from KPIs within frameworks that apply to you—for example, ISO 9001 for quality management and ISO 27001 for information security.
Step 2: Customize metrics for your business needs
Tailor VRM benchmarks for your organization’s size, strategic goals, and regulatory ecosystem. You can choose to have tighter or more lax metrics for different vendor risk tiers. For instance, here’s a sample set of KPIs you can track for high-risk vendors:
- 99.9% service uptime
- Zero compliance violations and security incidents annually
- 95% on-time delivery
- 100% adherence to proposed SLA practices
- All incidents resolved within one business day
Step 3: Configure alerts for key updates
Configuring VRM software alerts supports continuous monitoring of vendor risks and ensures timely responses to potential issues. Assign responsibility for setting up these alerts to a dedicated VRM program admin.
Determine who should receive alerts based on the type and severity of the KPI or KRI deviation. For instance, IT security teams should be notified of data-related incidents, while updates about service disruptions should first go to operations or vendor managers. You can tier alerts by urgency, with high-priority issues triggering immediate notifications and less critical updates sent as daily summaries.
{{cta_testimonial5="/cta-modules"}}
Leveraging technology for efficient VRM
Technology plays a critical role in tracking VRM metrics efficiently. For instance, you need data collection tools to gather, visualize, and analyze KPI and KRI data from multiple sources, such as ERP and CRM platforms.
That’s why many VRM solutions today are bolstering their capabilities with AI, machine learning, and process automation technology. These tools reduce manual effort and promote efficient metrics tracking in several ways, such as:
- APIs to collect relevant data from other platforms.
- Machine learning and predictive analytics to identify trends in vendor data.
- Automation-enabled vendor due diligence and risk assessments.
- AI-powered insights to improve your VRM program.
- Dashboards offering real-time visibility into key metrics.
Continuously monitor VRM metrics with Vanta
Tracking KPIs and KRIs is a non-negotiable part of building a reliable working partnership with vendors. You can ensure your tracking processes are efficient and watertight with Vanta’s Vendor Risk Management solution.
Vanta removes manual work across your VRM program—from onboarding to risk assessment and remediation. Here are some of its key features that boost efficiency:
- Centralized vendor inventory (with automated onboarding)
- Customizable vendor risk assessments with auto-scoring
- Built-in rubrics to calculate vendor risks and analyze access controls
- Comprehensive visual dashboard with real-time insights into tracked metrics
- Automated vendor security reviews and suggested follow-up tasks
- 300+ integrations to create a cohesive VRM workflow
- Logic-based tests for continuous monitoring of controls
Watch our webinar to see Vanta in action. Or request a custom demo to get started!
{{cta_simple5="/cta-modules"}}
Explore more TPRM articles
Introduction to TPRM
Vendor lifecycle management
Vendor risk assessment
Running a VRM program
Get started with TPRM
Start your TPRM journey with these related resources.
How to minimize third-party risk with vendor management
Get insights and best practices from security & compliance experts on how to manage third-party vendor risk in this free guide.
.svg)
Vanta in Action: Vendor Risk Management
Vendor security reviews can be manual and time-consuming, draining security teams of precious hours. Vanta’s Vendor Risk Management solution changes that, automating and streamlining security reviews so that you can spend less time on repetitive work and more time strengthening your security posture. Curious to see what it looks like?
10 important questions to add to your security questionnaire
We’ve identified 10 critical questions to include in your security questionnaire and why each answer is vital for informed decision-making.
