Driver Escalation Rules
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:
Where:
GrowthIndexcaptures structural escalation.SeasonalityIndexcaptures intra year patterns.ScenarioScalecaptures 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.
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