| Scenario | Vendors | Prob/Vendor | Avg Incident Cost | Program Cost | Reduction Used | Avoided Loss | Annual ROI |
|---|---|---|---|---|---|---|---|
| Mid-market baseline | 60 | 1.00% | $150,000 | $49,100 | ~26.75% | $24,075 | -50.97% |
| Higher exposure | 120 | 1.50% | $200,000 | $78,000 | ~35.60% | $128,160 | 64.31% |
| Stronger controls | 80 | 1.20% | $180,000 | $62,000 | ~48.10% | $83,174 | 34.15% |
- Direct: ALE = baseline_ale
- Computed: ALE = vendors × probability_per_vendor × average_incident_cost
- prevention = risk_reduction%
- effective = 1 − (1−prevention) × (1−0.35×detection_uplift) × (1−0.25×response_reduction)
- Capped at 95% maximum reduction
- program_cost = tools + assessments + (hours × rate) + consulting + training + other
- avoided_loss = ALE × effective_reduction
- annual_benefit = avoided_loss + intangible_value (if enabled)
- annual_ROI% = (annual_benefit − program_cost) ÷ program_cost × 100
- NPV uses an annuity factor over the horizon with the discount rate
- Choose whether you will enter a baseline ALE or compute it from vendors, probability, and impact.
- Fill in your expected prevention reduction and optional detection/response improvements.
- Enter annual program costs, including labor hours and loaded hourly rates.
- Optionally add intangible value if you can defend it to stakeholders.
- Click Calculate ROI. Results appear above the form under the header.
- Use Download CSV or Download PDF to share results with leadership, audit, or budgeting teams.
Translate vendor footprint into annualized loss
Most programs stall because risk stays qualitative. This calculator turns a vendor footprint into a baseline annual loss expectancy (ALE) using either a direct estimate or vendors × probability × impact. For example, 60 vendors at 1% annual incident probability and $150,000 impact implies a $90,000 ALE. That figure becomes a shared baseline for security, procurement, and finance to compare investments consistently. Track this baseline quarterly as vendor count and criticality shift over time.
Model reduction without double counting improvements
Third‑party controls reduce loss through prevention, earlier detection, and cheaper response. If you simply add percentages, benefits get overstated. The calculator uses a conservative stacking approach and caps total reduction at 95%. A 25% prevention improvement plus a 5% detection uplift and 0% response savings might translate to an effective reduction in the high‑20% range, not 30%. Document assumptions so reviewers see why prevention, detection, and response are weighted.
Cost inputs should reflect the full operating picture
Programs rarely fail because tools are expensive; they fail because labor is underestimated. Capture annual subscriptions, assessment fees, and internal effort as staff hours × loaded hourly rate. Add consulting, training, and recurring evidence collection costs. When annual cost is $49,100, even a $60,000 annual benefit can be attractive, but only if the benefit is defensible and repeatable. Include renewal uplifts and contract management effort to avoid surprise overruns later.
ROI, payback, and NPV support budget conversations
Annual ROI is useful for quick comparisons, but NPV makes multi‑year planning credible. With a three‑year horizon and an 8% discount rate, the tool converts annual net benefit into present value. This helps justify investments that have upfront setup but steady savings. Pair NPV with payback period to show when the program turns cash‑positive. NPV is especially helpful when benefits ramp after onboarding and tiering completes.
Scenario analysis strengthens governance and vendor strategy
Use scenarios to pressure‑test the plan: change one driver at a time—probability, impact, or reduction. A higher‑exposure supplier set (120 vendors at 1.5% probability and $200,000 impact) can shift priorities toward continuous monitoring. Stronger controls can justify expanding scope to more vendors. Presenting three scenarios makes board reporting clearer and improves decisions on remediation, contract clauses, and offboarding. Use the same template for tier‑1 vendors first, then expand coverage safely.
1) What does baseline ALE represent?
Baseline ALE is your expected annual loss from third‑party incidents before new controls. Enter it directly, or compute it using vendor count, annual probability per vendor, and average incident cost.
2) Why cap the reduction at 95%?
No program eliminates all risk. The cap prevents unrealistic claims and helps keep outputs credible for audits, budgeting, and governance discussions.
3) How do we estimate probability per vendor?
Use internal incident history, peer benchmarking, vendor disclosures, and access level. Start conservative, then refine by vendor tiering and continuous monitoring signals.
4) What should be included in staff hours?
Include assessments, evidence review, remediation tracking, contract reviews, exception handling, reporting, and renewals. Use a loaded rate that includes benefits and overhead.
5) Should we include intangible benefits?
Only when you can defend the assumptions. Keep intangibles separate as a scenario, document the rationale, and avoid using them as the only reason the ROI works.
6) What is the best way to share results?
Export CSV for finance models and PDF for leadership packets. Present baseline ALE, effective reduction, net annual benefit, ROI, payback, and NPV alongside two to three scenarios.