Vendor Performance Improvement Plan Examples

You've identified a critical vendor failing to meet security requirements. Maybe they're consistently late on SOC 2 attestations, their vulnerability remediation SLAs have slipped, or recent pen tests revealed concerning gaps in their security posture. The business relationship remains valuable, but the risk exposure has become unacceptable.

A well-executed Vendor Performance Improvement Plan serves as both a remediation roadmap and a documented exit strategy. The best PIPs balance business continuity needs with risk tolerance thresholds, creating clear paths for vendors to either recover their standing or face controlled termination.

These real-world examples demonstrate how TPRM teams have successfully deployed PIPs across different vendor categories, risk scenarios, and regulatory environments. Each case study reveals specific tactics, timelines, and outcomes that you can adapt to your vendor portfolio.

Case Study 1: Critical SaaS Provider Security Remediation

A Fortune 500 financial services firm discovered their primary customer data platform vendor had multiple critical vulnerabilities during routine continuous monitoring. The vendor processed 2.3 million customer records daily and switching costs exceeded $4M.

Initial Risk Discovery

• 14 critical vulnerabilities identified through attack surface monitoring
• Missing MFA on administrative accounts
• Unencrypted data at rest for backup systems
• No incident response plan documentation
• Expired cyber insurance coverage

PIP Structure and Timeline

The TPRM team developed a 120-day remediation plan with weekly checkpoints:

Days 1-30: Immediate Risk Reduction

• Implement MFA across all privileged accounts
• Patch 8 critical vulnerabilities affecting internet-facing systems
• Provide temporary incident response procedures
• Submit cyber insurance renewal application

Days 31-60: Infrastructure Hardening

• Encrypt all backup data repositories
• Complete remaining vulnerability patches
• Conduct third-party penetration test
• Document formal incident response procedures

Days 61-90: Verification and Testing

• Re-scan all systems for vulnerability closure
• Validate encryption implementation
• Test incident response procedures with tabletop exercise
• Provide updated SOC 2 Type II report

Days 91-120: Ongoing Monitoring Setup

• Deploy continuous vulnerability scanning
• Establish monthly security review meetings
• Implement automated compliance monitoring
• Document all changes in updated security addendum

Enforcement Mechanisms

The contract amendment included:

• some payment holdback until day 60 milestones complete
• Right to terminate with 30 days notice if milestones missed
• Required weekly status reports to CISO
• Mandatory executive sponsor assignment

Outcomes

The vendor achieved 11 of 12 milestones on schedule. The delayed item (SOC 2 report) arrived 15 days late but passed all control requirements. Risk score improved from Critical to Medium within the 120-day window.

Case Study 2: Manufacturing Supplier Operational Resilience

A global pharmaceutical company discovered their API supplier lacked basic business continuity capabilities after a regional flooding event caused unexpected downtime.

Risk Assessment Findings

• No documented BCP/DR procedures
• Single manufacturing facility with no redundancy
• 72-hour RPO/RTO vs. 24-hour contractual requirement
• No crisis communication protocols
• Insufficient insurance coverage for business interruption

Phased Improvement Approach

Phase 1 (60 days): Documentation and Planning

• Develop comprehensive BCP documentation
• Conduct business impact analysis
• Map critical dependencies and single points of failure
• Establish crisis communication tree
• Review and upgrade insurance policies

Phase 2 (120 days): Infrastructure Investment

• Identify secondary manufacturing partner for overflow capacity
• Implement redundant data backup systems
• Deploy satellite communication systems for outage scenarios
• Create 30-day emergency inventory buffer
• Cross-train staff on critical processes

Phase 3 (180 days): Testing and Validation

• Execute full DR test with 48-hour facility shutdown
• Validate secondary supplier production quality
• Test communication protocols during simulated crisis
• Measure actual vs. target recovery metrics
• Achieve ISO 22301 certification

Monitoring Framework

The PIP included automated monitoring through:

• Monthly backup restoration tests with logged results
• Quarterly tabletop exercises with rotating scenarios
• Semi-annual facility inspections by third-party auditors
• Real-time inventory level dashboards
• Automated alerts for insurance policy expirations

Results and Adjustments

Initial DR test at day 150 revealed 36-hour actual recovery time versus 24-hour target. Additional investments in pre-positioned equipment reduced this to 22 hours by day 180. The vendor now maintains consistent "Low Risk" ratings across all operational resilience categories.

Case Study 3: Fourth-Party Risk Management Enhancement

A major cloud provider to healthcare organizations discovered concerning fourth-party exposures through their TPRM platform's continuous monitoring capabilities.

Fourth-Party Risk Identification

• 47 undisclosed subprocessors handling PHI
• 12 offshore development centers without security assessments
• Critical authentication services outsourced to startup vendor
• No fourth-party incident notification requirements
• Missing data localization controls for EU data subjects

Structured Remediation Program

Immediate Actions (30 days)

• Complete inventory of all fourth parties with data access
• Risk tier all identified subprocessors
• Terminate relationships with 8 high-risk vendors
• Implement emergency notification protocols

Medium-term Controls (90 days)

• Assess all Tier 1 and Tier 2 fourth parties
• Deploy standardized fourth-party agreements
• Establish data flow mapping for all critical processes
• Implement geographical restrictions for sensitive data
• Create fourth-party risk register with quarterly updates

Long-term Governance (180 days)

• Achieve SOC 2 Type II coverage for fourth-party management
• Deploy automated fourth-party discovery tools
• Establish formal fourth-party risk committee
• Implement continuous monitoring for critical fourth parties
• Create customer-facing transparency portal

Compliance Framework Alignment

The PIP addressed requirements from:

• HIPAA Business Associate Agreement obligations
• GDPR Article 28 processor requirements
• SOC 2 CC6.1 (Logical and Physical Access Controls)
• ISO 27001 A.15 (Supplier Relationships)
• NIST CSF ID.SC (Supply Chain Risk Management)

Measurable Improvements

• Fourth-party visibility increased from 23% to 94%
• Average fourth-party assessment completion: 21 days
• Critical fourth-party incidents: reduced from 3 quarterly to 0
• Customer audit findings: decreased by 78%
• Regulatory inquiries: eliminated completely

Common PIP Variations

Accelerated PIPs (30-45 days)

Used for:

• Single control failures with clear remediation paths
• Vendors with strong track records hitting temporary issues
• Low-complexity fixes like policy updates or training gaps

Extended PIPs (6-12 months)

Appropriate when:

• Major infrastructure overhauls required
• Regulatory consent orders demand extensive documentation
• Cultural transformation needed across vendor organization
• Multiple interdependent control failures exist

Collaborative PIPs

Some organizations deploy joint improvement plans where both parties contribute resources:

• Shared cost for security tool implementation
• Joint training programs for specialized compliance requirements
• Co-developed runbooks for incident response
• Mutual investment in monitoring infrastructure

Edge Cases and Lessons Learned

When PIPs Fail: Roughly a significant number of PIPs result in vendor termination. Common failure patterns include:

• Vendor lacks resources to implement required changes
• Executive leadership not committed to improvements
• Technical debt too severe for realistic remediation
• Business model fundamentally incompatible with security requirements

Successful PIP Indicators:

• Vendor proactively suggests additional improvements
• Milestones achieved ahead of schedule
• Regular communication without prompting
• Investment in permanent monitoring capabilities
• Cultural shift toward risk awareness

Legal Considerations: Always involve legal counsel when structuring PIPs to ensure:

• Termination rights are preserved
• Improvement requirements are technically feasible
• Liability allocation remains appropriate
• Regulatory notification requirements are met
• Intellectual property concerns are addressed

Frequently Asked Questions

How do you determine if a vendor qualifies for a PIP versus immediate termination?

Evaluate three factors: criticality to operations, cost/complexity of switching, and vendor's demonstrated commitment. If the vendor is critical, switching costs exceed $500K, and they show genuine engagement, a PIP typically makes sense.

What's the optimal duration for a vendor PIP?

90-120 days hits the sweet spot for most scenarios. This provides enough time for meaningful change while maintaining urgency. Extend to 180 days for infrastructure overhauls, compress to 60 days for policy/process fixes.

Should PIPs include financial penalties or incentives?

Payment holdbacks (10-20%) create powerful motivation without being punitive. Avoid pure penalties that strain relationships. Consider performance bonuses for early completion only if the vendor requests investment help.

How do you handle vendors who partially complete PIP requirements?

Create graduated risk acceptance criteria upfront. Define "must-have" versus "nice-to-have" improvements. Document any accepted residual risks with compensating controls and increased monitoring frequency.

When should you involve vendor executive leadership in a PIP?

Immediately for critical or strategic vendors. Require executive sponsor assignment in the PIP terms. Schedule monthly executive review calls. This dramatically improves success rates and prevents surprises.

How do you prevent vendors from backsliding after PIP completion?

Build ongoing monitoring requirements into the PIP exit criteria. Automate compliance checks where possible. Include regression penalties in contract amendments. Schedule quarterly review meetings for the first year post-PIP.