Major challenges concerning the reliability of resistive switching random access memories based on the valence change mechanism (VCM) are short-term instability and long-term retention failure of the programmed resistance state, particularly in the high resistive state. On the one hand, read noise limits the reliability of VCMs via comparatively small current jumps especially when looking at the statistics of millions of cells that are needed for industrial applications. Additionally, shaping algorithms aiming for an enlargement of the read window are observed to have no lasting effect. On the other hand, long-term retention failures limiting the lifetime of the programmed resistance states need to be overcome. The physical origin of these phenomena is still under debate and needs to be understood much better. In this work, we present a three-dimensional kinetic Monte Carlo simulation model where we implemented diffusion-limiting domains to the oxide layer of the VCM cell. We demonstrate that our model can explain both instability and retention failure consistently by the same physical processes. Further, we find that the random diffusion of oxygen vacancies plays an important role regarding the reliability of VCMs and can explain instability phenomena as the shaping failure as well as the long-term retention failure in our model. Additionally, the results of the simulations are compared with experimental data of read noise and retention investigations on ZrO2-based VCM devices.