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I have followed the directions in the forums and Dangerous Waters still crashes (Failed to initialize the graphics display). I'm obviously missing a step somewhere. I've been away from this game for a long, long while but recently had a taste to try it again. I'm using the Steam version and the OS is Windows 10. Is there anything else that I could try?
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Right click on the .exe in your root folder and go to property --> compatibility --> reduced color mode.
Please make sure you install d3d8.dll too.