# Driver Escalation Rules

{% hint style="info" %}
You will learn:

* How to express escalation via drivers.
* How presets can produce common escalation behaviours.
* How to layer escalation on top of base series.
* How to design escalation for scenarios.

Escalation rules let you move beyond flat assumptions and capture dynamic behaviour in a controlled way.
{% endhint %}

## Drivers, Variables and Timing - Driver Escalation Rules

This article explains how **driver escalation rules** work in Model Reef and how to represent growth, inflation and other changing patterns over time.

***

### 1. What is escalation

Escalation refers to **systematic changes over time** in a series, for example:

* Revenue growing at a percentage per year.
* Costs increasing with inflation.
* Prices stepping up at contract renewal points.
* Wages growing with seniority and market rates.

In Model Reef, escalation is usually expressed through drivers and presets rather than manually editing every period.

***

### 2. Escalation via drivers

You can represent escalation directly as a driver, for example:

* `Driver - Growth Rate - Revenue - Core`.
* `Driver - Inflation - Opex`.
* `Driver - Wage Inflation - Engineers`.

Then, in variables, you apply the escalation driver to a base series:

* `Revenue = BaseRevenue * (1 + GrowthRate)`.
* `Opex = BaseOpex * InflationIndex`.
* `Staff Cost = BaseSalary * WageInflationIndex`.

This keeps the escalation logic explicit and separate from the base level assumptions.

***

### 3. Escalation via presets

Model Reef also provides preset behaviours that embed escalation logic, for example:

* Fixed percentage growth per period.
* Growth from regression on historical data.
* Machine learning based trend extension.
* Scheduled step changes at specific dates.

Under the hood, these presets generate a time series that acts as a driver, which is then applied to the variable.

You can usually override preset behaviour with custom drivers for more control.

***

### 4. Layering escalation and modifiers

Escalation is often combined with modifier drivers, for example:

* Base trend represented by an escalation driver.
* Seasonal pattern represented by a seasonality modifier.
* Scenario impact represented by a scenario modifier.

Formula example:

```
Revenue = BaseLevel * GrowthIndex * SeasonalityIndex * ScenarioScale
```

Where:

* `GrowthIndex` captures structural escalation.
* `SeasonalityIndex` captures intra year patterns.
* `ScenarioScale` captures scenario specific adjustments.

This layering lets you separate different dimensions of change cleanly.

***

### 5. Scenario design with escalation rules

Scenarios often differ more in their **escalation paths** than in their starting levels.

Examples:

* Base Case: moderate revenue growth and controlled cost inflation.
* Downside: lower revenue growth and higher wage inflation.
* Upside: stronger revenue growth with stable cost inflation.

You can achieve this by:

* Keeping base levels similar.
* Changing growth rate or escalation driver paths per scenario.
* Adjusting only the drivers, not the underlying formulas.

This makes scenario differences clear and easy to explain to stakeholders.

***

### 6. Good practice for escalation rules

Guidelines:

* Use drivers to express escalation rather than hard coding patterns inside every variable.
* Avoid overly complex escalation logic unless it is justified by the decision context.
* Document key escalation drivers and their rationale.
* Ensure that escalation assumptions are consistent across related variables (for example wages across teams).

Well designed escalation rules make forecasts more realistic without making models brittle.

***

## Related articles

* [Multi-Product Financial Model](/use-cases/financial-services-lending-and-fintech/multi-product-financial-model.md)
* [Investment & Transactions](/how-tos/investment-and-transactions.md)
* [Driver Frequency Rules](/help/drivers-variables-and-timing/driver-frequency-rules.md)
* [Period Toggle Rules](/syntax/chart-and-table-syntax/period-toggle-rules.md)


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