I had to give the Parallels Desktop full disk access:
System Preferences > Security and Privacy > Privacy tab > in the left pane click "Full Disk Access" > click the lock at bottom left > then click the + to add "Parallels Desktop.app" > when prompted click the quit now and relaunch Parallels and it should startup like normal.
Not sure why MacOS is not prompting you to allow full disk access for the app upon launch like it does for Documents, Downloads etc.
