Overseas Shipholding Group (OSG) Risk Analysis

The Company conducts certain of its operations internationally, and its business, financial condition, results of operations and cash flows may be adversely affected by changing economic, political and government conditions in the countries and regions where its vessels are employed. OSG must comply with complex foreign and U.S. laws and regulations, such as environmental regulations, the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act and other local laws prohibiting corrupt payments to government officials, anti-money laundering laws; and anti-competition regulations. OSG's operations may also subject its employees and agents to extortion attempts. Violations of these laws and regulations could result in fines and penalties, criminal sanctions, restrictions on the Company's business operations and on the Company's ability to transport cargo to one or more countries, and could also materially affect the Company's brand, ability to attract and retain employees, international operations, business and operating results. Although OSG has policies and procedures designed to achieve compliance with these laws and regulations, OSG cannot be certain that its employees, contractors, joint venture partners or agents will not violate these policies and procedures. There are occasions when a vessel is operating in an area where terrorist or pirate attacks, or hijackings are a concern. If this occurs in regions in which  are characterized by insurers as "war risk" zones or Joint War Committee "war and strikes" listed areas, premiums payable for insurance coverage could increase significantly, and such insurance coverage may become difficult to obtain. Crew costs could also increase in such circumstances. While OSG believes the charterer remains liable for charter payments when a vessel is seized by pirates, disputes with the charterer may result in the delay or non-payment of charter hire, or cancellation of the charter party. The Company may not be adequately insured to cover losses from these incidents, or an increase in the cost (or unavailability) of insurance for those vessels could have a material adverse impact on OSG's business, financial condition, results of operations and cash flows. Such attacks may also impact the Company's customers, which could impair their ability to make payments to the Company under its charters. Terrorism or international hostilities could cause political instability, damage the world economy, adversely affect the availability of and demand for crude oil and petroleum products and adversely affect both the Company's ability to charter its vessels and the charter rates payable under any such charters. Such circumstances are present currently as a result of the conditions in the Middle East and the Russian war on Ukraine. These factors could also increase the costs to the Company of conducting its business, particularly crew, insurance and security costs, and prevent or restrict the Company from obtaining insurance coverage, all of which could have a material adverse effect on OSG's business, financial condition, results of operations and cash flows.

The market value of Jones Act and U.S. Flag vessels has fluctuated over time. The fluctuating market values of the vessels can impact the Company's liquidity regardless of whether the Company sells or continues to hold the vessels. For example, selling a vessel at a sale price that is less than the vessel's carrying amount on the Company's financial statements will result in a loss on the sale and a reduction in earnings and surplus. Declining values of the Company's vessels could adversely affect the Company's liquidity by limiting its ability to raise cash by refinancing vessels. The Company may also experience significant impairment charges upon a decline in vessel value. Any charges relating to such impairments could adversely affect the Company's liquidity, results of operations and financial condition.

The Company is responsible for monitoring the foreign ownership of its common stock and other interests to ensure compliance with the Jones Act. The Company could lose the privilege of owning and operating vessels in the Jones Act trade if non-U.S. Citizens were to own or control, in the aggregate, more than 25% of the equity interests in the Company. Such loss would have a material adverse effect on the Company's business and results of operations. In addition, failure to comply with the Jones Act could result in the Company being deemed to have violated other U.S. federal laws that prohibit a foreign transfer of U.S. documented vessels without government approval, resulting in severe penalties, including permanent loss of U.S. coastwise trading privileges or forfeiture of the vessels deemed transferred, and fines. Maritime transportation services are currently excluded from the General Agreement on Trade in Services ("GATS") and are the subject of reservations by the United States in the North American Free Trade Agreement ("NAFTA") and other international free trade agreements. If maritime transportation services were included in GATS, NAFTA or other international trade agreements, or if the restrictions contained in the Jones Act were otherwise repealed or altered, the transportation of maritime cargo between U.S. ports could be opened to international flag or foreign built vessels. Interest groups regularly lobby Congress, and legislation has been introduced, to repeal certain provisions of the Jones Act or to grant extensive waivers so as to facilitate international flag competition for trades and cargoes currently reserved for U.S. Flag vessels under the Jones Act. The Jones Act requires vessels to be U.S.-owned, U.S.-crewed, and U.S.-built, and in the event that any one of these requirements is not met resulting in the unavailability of a Jones Act qualified vessel, a waiver could be issued. A waiver, modification or repeal of the Jones Act could significantly increase competition in the coastwise trade and could have a material adverse effect on the Company's business, results of operations, cash flows and financial condition.

The Company is a party to collective-bargaining agreements that require contributions to three jointly managed multiemployer pension plans covering seagoing personnel of U.S. Flag vessels. Our required contributions to these plans could increase because of a shrinking contribution base as a result of the insolvency or withdrawal of other companies that currently contribute to these plans, the inability or failure of withdrawing companies to pay their withdrawal liability, low interest rates, lower than expected returns on pension fund assets or other funding deficiencies. Certain of these multiemployer plans are currently underfunded. Significantly underfunded pension plans are required to improve their funding ratios within prescribed intervals based on the level of their under-funding. As a result, OSG's required contributions to these plans may increase in the future. In addition, a termination of or voluntary withdrawal from or a mass withdrawal of all contributing employers from an underfunded multiemployer pension plan would require OSG to make payments to the plan for our proportionate share of such multiemployer pension plan's unfunded vested liabilities. See Note 15, "Pension, Other Post Retirement Benefit Plans and Benefit Liabilities," to the Company's consolidated financial statements set forth in Item 8 for additional information. Requirements to pay increased contributions or withdrawal liabilities could have a material adverse impact on our liquidity and results of operations.

The Company's operations are affected by extensive, complex, and changing international, national, and local environmental protection laws, regulations, treaties, conventions and standards designed to reduce the risk of oil spills and water pollution and to regulate and reduce air emissions, including emission of greenhouse gases. These regulations are summarized in detail in Item 1, "Business - Environmental, Safety and Security Matters". These requirements impose significant capital and operating costs on OSG as well as the potential for unlimited liability in certain circumstances. Due to concern over the risks of climate change, a number of countries, including the United States, and international organizations, including the IMO and the EU, have adopted, or are considering the adoption or modification of, regulatory frameworks to reduce greenhouse gas emissions. Regulations and the reporting mechanisms to measure emissions are evolving, as multiple concerned constituents attempt to standardize the measurement and reporting of varying operational factors for many types of vessels and conditions, including such measures as the Energy Efficiency Existing Ship Index ("EEXI") and the Carbon Intensity Indicator ("CII"). The CII's letter grading system for a ship's CO2 emissions performance is based upon calculation methodologies that are presently being debated, correction factors that are open to further modification, and a review process that will remain open until 2026, leading to considerable uncertainties in interpretation and enforcement. Absent a change in the CII rules as currently stated, ships with low grades may face the potential threat of enforcement and retirement if the ratings do not improve during the stipulated remediation period. The mechanisms to achieve a "passing" grade may require changes in the responsibilities among the supply chain participants, changes to the operating patterns of vessels or the speeds at which they may sail, or the types of fuel to be consumed, as well as capital investments in equipment and technology many of which are not yet established as viable. These regulations could result in significant financial and operational impacts on the Company's business and on the global industry, including requiring OSG to install new emission controls, to invest in technologies or equipment, to retrofit vessels, to acquire allowances, or to pay taxes related to its greenhouse gas emissions. Further, in cases where the Company invests in new technologies or equipment, there is no assurance that such technologies or equipment will perform as expected, notwithstanding that the Company will have performed due diligence in selecting the particular technology or equipment. Environmental laws and regulations can affect the resale value or significantly reduce the useful lives of the Company's vessels, require a reduction in carrying capacity, ship modifications, or operational changes or restrictions (and related increased operating costs) or retirement of service, lead to decreased availability or higher cost of insurance coverage for environmental matters, or result in the denial of access to, or detention in, certain jurisdictional waters or ports. Under local, national and foreign laws, as well as international treaties and conventions, OSG could incur material liabilities, including cleanup obligations, natural resource damages, fines and penalties in the event that there is a release of oil, petroleum or other hazardous substances from its vessels or otherwise in connection with its operations. OSG could be subject to personal injury or property damage claims relating to the release of or exposure to hazardous materials associated with its current or historic operations. Violations of or liabilities under environmental requirements also can result in substantial penalties, fines and other sanctions, including in certain instances, seizure or detention of the Company's vessels. It can be expected that these regulations will continue to become stricter in the future and will require the Company to incur significant capital expenditures to keep its vessels in compliance, or even to scrap or sell certain vessels altogether. Such expenditures could result in financial and operational impacts that may be material to OSG's financial condition. The failure to comply with local, domestic and foreign regulations may subject the Company to increased liability, may invalidate existing insurance or decrease available insurance coverage for the affected vessels and may result in a denial of access to, or detention in, certain ports.

OSG has both on-shore and ship-board systems that are highly dependent on information technology systems. The Company collects, stores and transmits data using both internal information technology systems and those of third-party vendors. The secure storage, processing, maintenance, and transmission of sensitive data, including our own proprietary business information and that of our customers, and personally identifiable information of our customers and employees, is critical to the Company's operations. Information technology and communication systems are subject to reliability issues, integration and compatibility concerns, and security-threatening intrusions. OSG's network, or those of our customers or third-party vendors, could be vulnerable to unauthorized access, computer viruses, or targeted attacks intended to steal or destroy data, disrupt or degrade service, sabotage systems or cause other damage. The Company may be required to spend significant capital and other resources to protect against these threats or to alleviate problems caused by security breaches or viruses. Security breaches and viruses could expose the Company to claims, litigation and other possible liabilities and could also cause customers to lose confidence in OSG's systems. OSG has not experienced any material cyber security violation or occurrence over the last three years, and we invest time, effort and financial resources to proactively secure our systems, networks and communications. However, these actions cannot provide absolute assurance that we will be successful in preventing or responding to all cyber security attacks. Any failure or breach of OSG's or third-party systems could result in interruptions in service, reductions in revenue and profits, damage to reputation and brand, or liability for the release of confidential information, all of which may have a material impact on our operations and financial results.

The Company is currently in the process of transitioning to new software systems for managing ship and financial operations. From time to time the Company implements new systems or upgrades technological resources utilized in running its business. The transition to new technology requires a significant investment in capital and personnel resources and the coordination of numerous software and system providers and internal business teams. The Company may experience difficulties as it manages these changes and transitions to a new system and upgrades its technological resources, including loss or corruption of data, delays, decreases in productivity, and unanticipated expenses. The Company could be adversely affected if the new software systems or other new or upgraded technological resource are defective, not installed properly, fail to perform as marketed or are not properly integrated into existing operations. The implementation of a new system may not result in improvements that outweigh the cost of implementation. System implementation failures or operational failures, including unauthorized access by third parties to our new software system (which could have the effects described in the preceding risk factor) could have adverse effects on the Company's business, financial position, and ability to operate in a complex industry.