You have to be careful with the wet exhaust almost regardless of where it's placed, due to the possibility of strong waves forcing sea water through it, & towards or into the
engine. With obvious consequences. And if the exhaust outlet is under water half of the time or more, when under sail or
power, due to being on the side of the hull, then I'm thinking that it's that much more vulnerable.
Some vessels which operate in locales with lots of heavy
weather will put a through hull/ball valve at the exhaust's exit at the transom, in addition to a flapper overtop of the exhaust fitting on the boat's outside. And I've even heard of guys putting loop
seals into the hose, as close to the exhausts stern exit point as possible, so as to lessen the chances of sea water back flooding the engine.
I may be off on some of the above, as I've far from tried all of those things. Though the idea of getting water shoved into the cylinder
head gives me the willies. Especially if the engine can't be shut down in time & the heads get destroyed. Or worse, connecting rods get bent, etc.
The other caveats to one or two of the above techniques is that you need to have a failsafe way of reminding yourself to open the transom's exhaust through hull prior to starting the engine. And also that you can't quickly start up the engine in order to get out of a sticky situation in order to save the boat from harm, or to pick up an
MOB, without doing some damage to the engine's ass half
plumbing, & also the exhaust system.