This worked for me until they get this fixed. It is not perfect, as things run slow and graphics are blurry. The official support is hiding behind Big Sur being a beta, but Parallels 15 worked perfectly on it for me. The 16 update borked my hole ability to run it, until I did this. This is not a perfect solution, but works.
1. Locate the virtual machine's file as described in this article:
https://kb.parallels.com/en/117333
(It is usually in your user folder under Parallels folder)
2. Right-click on it > Show Package contents.
3. Inside you will see a config.pvs. Right-click config.pvs > Open with TextEdit.
4. Inside of it find (CMD+F) the following part:
<HypervisorType>0</HypervisorType>
and change it to
<HypervisorType>1</HypervisorType>
Save the changes.
5. Run Parallels Desktop. Run the virtual machine. If prompted to reset the virtual machine, do it.
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