Insurance won't like it = won't pay out on a claim or won't insure you.
Get your feet wet......and everything that's at deck level. If the engine's relief exhaust ports end up underwater it could be very difficult to start or worse,
boats with "open transoms" have weather-decks (sealed and above waterline.) A 4mtr boat is not going to have a deck above the water line.
If you get a breakdown the boat will "weather-cock" down wind (every powerboat does that) and you could be confronted with the prospect of taking the cover of a powerhead that's only a couple of inches above the water with waves washing into the tray while you're trying to sort it.
No it's not going to sink because you cut 5" off the transom but the boat could end up a PITA dog that you can't give away.
You could probably pick up all the parts to convert the engine to longshaft or buy a blown LS engine for a couple of hundred pounds.
Sort it right or you'll spend your time on the water wishing you had.