Word Could Not Create the Work File - Check Temp Environment Variable

You should always try installing the latest patches especially when using apps on a completely new hardware platform (aka CPU) since the patch may have fixed the issue. You won't lose your data if you have backups.

Have you tried running Disk Utility First Aid on the hidden Container? Within Disk Utility click on "View" and select "Show All Devices" so that the hidden Container appears on the left pane of Disk Utility. Even if First Aid reports everything is "Ok" click "Show Details" and scroll through the report to see if any unfixed errors are reported. If there are any unfixed errors listed, then you will need to erase the whole physical drive before restoring from a backup or clone.

You should always have frequent and regular backups. FYI, it is impossible to recover accidentally deleted data from an SSD after the Trash has been emptied plus an SSD can fail at any time without any warning signs. Plus with the 2018+ Macs the SSD is integrated onto the Logic Board and using hardware encryption which means if the Logic Board fails for ANY reason you would need an expensive professional data recovery service to attempt to recover data with no guarantees of success.

Hello CNanPH,

Thanks for reaching out to us in Apple Support Communities about a error you’re receiving in Word, we're happy to help by looking into this more! 

Here's a resource that can help:

Office shows one of the following error messages - “could not create the work file,” “Access denied,” or “file cannot be previewed” - Office | Microsoft Docs

If you review this article and still have the issue or questions about this issue, It would be best to reach out to Microsoft directly. This article can help:

How to contact an app developer

Hope this helps.

Best Regards.