Although M1 Macs have some unique restrictions, in many ways they’re among the most flexible of Apple’s recent models.
There are four scenarios to prepare for in terms of disaster recovery.
Loss or damage to data on the Data volume, on the internal SSD.
The response is to open Time Machine and restore the files from there
Damage to the System.
This is prevented by the fact that M1 Macs, like Intel models, booting from Big Sur or Monterey
do so not from a mounted volume,
but from a signed and sealed snapshot.
Because snapshots are read-only and can’t be changed in any way, the chances of a corrupt System snapshot occurring are very low.
in most cases you should expect to migrate your data back from a Time Machine backup or a copy or clone of the Data volume, on an external disk.
Soft damage to the whole of the internal SSD.
What the user can’t normally see is that this isn’t just the container (partition) for macOS, but includes two hidden containers too:
the Pre-Boot container is used for what is effectively the firmware
The other container holds a Recovery system, although in Monterey that copy isn’t the one normally used for Recovery
If the Pre-Boot container is damaged, the Mac is unable to boot, even though it may be connected to a bootable external disk,
as the only Pre-Boot it can use in the early part of the boot process is that located on the internal SSD.
In that case, the only way forward is to put the Mac into DFU mode
M1 Macs are, to the best of my knowledge, the only Macs that Apple has made which can be taken right back and restored by the user in this way.
It normally takes less than 15 minutes.
Hard failure of the internal SSD
Because it’s soldered to the logic board, the only remedy is a replacement logic board,
which is performed under warranty and AppleCare by an authorised service provider.
Contrary to some opinion, M1 Macs are straightforward to boot from an external SSD,
although you must never confuse that process with booting an Intel Mac from an external disk.
In the latter, the whole of the boot process can run from the external SSD.
M1 Macs invariably start their boot process from their internal SSD, and only then transfer to the external boot system.
Once you’ve made a bootable external disk, and its ownership is recognised by macOS so that Mac can start up from it, you can use that disk with other M1 Macs.
Unlike Intel Macs with T2 chips, you don’t have to change an M1 Mac’s security settings for it to boot happily from an external disk.
You can also repartition your M1 Mac’s internal SSD to provide additional containers, and install multiple bootable copies of macOS on that internal storage.
You can also install multiple versions of macOS in a single container if you wish.