Etok Restaurants Sdn. Bhd. (Etok) runs a chain of fast food restaurants which ar

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Etok Restaurants Sdn. Bhd. (Etok) runs a chain of fast food restaurants which are all in the East Coast Malaysia. The company is wholly owned by the Razin family, and has a Board of directors consisting of three executive directors, a non-executive Chair, Johan Ahmad (who has recently joined the board) and one other independent non-executive director. The company has a few hundred employees, many of whom are young in age. It has been running an advertising campaign for its restaurants, including a campaign on social media.

The Chief Executive, Darwish Razin, has been developing a proposal for the company to diversify and develop a new business of supplying some of the company's products directly to supermarkets. He wants to discuss this proposal, and the significant financial investment that would be required in new staff, equipment and marketing, at the next Board meeting. Darwish has told Johan that the Board does not need to discuss the risks relating to the proposed new business because the executive management team have already considered the risks and are happy that they can be managed.

Johan has also been discussing Etok's approach to corporate social responsibility (CSR) with Darwish, who explained that the company had made a number of charitable donations in recent years, that moving to non-plastic items in the restaurants would be more expensive and that he thought that rather than focusing on CSR issues the Board should instead focus on the company's profitability. Johan is not happy with Darwish's response and wants to discuss at the next Board meeting how the company should approach CSR issues.

REQUIRED:

Johan has asked the Company Secretary of Etok, Dini Irsyad, to prepare two briefing notes for him before the next Board meeting:

(a) Discussing the Board's role in relation to considering the risks of the proposed new business before it approves the proposal and explaining how the management team should have identified and assessed risks relating to the proposed new business.

(13 marks)

(b) Analysing the advantages to Etok considering CSR issues as part of its business strategy, including the types of CSR issues that could be considered and how the Board could measure the success of any CSR initiatives.

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(a)The Board of directors of Etok is responsible for making any major strategic decision related to the company's businesses. This includes any decision related to the proposed new business of supplying products directly to supermarkets. The Board should assess the risk associated with the new business before they approve of it.



Any new enterprises should have their risks identified and evaluated by the executive management team, who should then report their findings to the board in a structured manner. As a result, it is important to identify potential risks and assess them in terms of their severity, likelihood, and business-related impact. To reduce risks or lessen the impact, a list of risk mitigation methods would then be prepared. When deciding whether to approve the new business, the Board should take these into account.


(b)The benefits of implementing CSR initiatives as part of the business strategy for Etok include improved reputation among customers and prospects, increased employee morale, better relations with stakeholders, and decreased reputational damage in the event of any crises.



Implementing environmental regulations like using non-plastic items and lowering carbon footprint, giving to regional causes, and creating employee education and training programs are some examples of the CSR projects that may be taken into consideration.



The Board might monitor the results of any CSR initiatives on customer relations, employee morale, and brand awareness in the marketplace to determine their success. Additionally, it might keep track of how CSR initiatives are affecting the sales and profits of the business. The Board should also monitor any regulatory compliance with compliance and CSR-related standards.

Step-by-step explanation
Today, corporate social responsibility (CSR) is a crucial factor for many organizations. CSR is a business approach that combines maximizing corporate profit while also doing your part to improve society. It entails initiatives like giving to neighborhood charities, creating educational and training programs for staff members, and putting environmental principles like adopting non-plastic products and lowering carbon footprint into action. A CSR program's primary objective is to generate value that the firm and society can share.



A company like Etok Restaurants Sdn. Bhd. can gain a variety of advantages by integrating CSR into its business plan. These include enhanced customer loyalty and involvement with the company, enhanced employee morale, and enhanced brand reputation. Putting CSR plans into practice can also result in improved relationships with stakeholders and less reputational harm in the event of a crisis.



Etok would need to monitor the effects of CSR initiatives on customer relations, employee morale, and brand awareness in the marketplace in order to assess the effectiveness of a CSR strategy. It should also keep an eye on how initiatives are affecting sales and profits. Monitoring compliance with any relevant regulatory standards is also essential.



Any significant strategic choice affecting Etok's businesses must be approved by the board of directors. Since the senior management team is in charge of discovering and evaluating risks involved with any new ventures, it is crucial that the Board examine the risk associated with the new business before authorizing it. The Board should also think about how to integrate CSR activities into the overall business plan and how to assess performance. In conclusion, the Board should make sure that any CSR activities and suggested new businesses are risk-evaluated and advantageous to both the firm and society.