Boot to recover by pressing option key while booting?
Is the Startup Security an option when booted to recovery?
Using Command-R, you boot into "recovery" mode. From there you can re-install macOS or change the security settings.
In order to change the security settings (that allow booting from external drives), a functional admin user account & password on the
internal SSD is required.
You can re-install macOS (or Time Machine backup) to either the functional internal SSD or an external drive without an admin macOS user account password. The security settings do not prevent macOS from being re-installed. So if you lose your admin password or the admin account becomes inaccessible, you can reinstall macOS and create a new admin account & password and then access the security settings.
Setting a firmware password will prevent access to recovery mode. In modern macs, the password is stored in firmware and if lost, can only be reset by taking it to an Apple store (however, that still does not allow Apple access to your drive if filevault is turned on). Once in recovery mode, you still need an admin password to access the security settings. The firmware password does not bypass the required admin password.
What we know will work and won’t work is as follows: if your SSD is functional but there’s no functioning admin user account, then you will only be allowed to boot an external drive if the security settings were
previously enabled to allow it. If the security settings were previously disabled, then the system will prevent booting from the external, and there’s no way to change the security settings until there’s a functioning admin account on the internal SSD.
What's not clear is what happens if the SSD is
non-functional but the computer otherwise works. If the SSD is bricked to the point where the admin user account is no longer functional, and re-installing macOS to the internal SSD won't work either, then that appears to be a scenario where booting from an external drive would only be possible if the security settings had been set to allow external booting
prior to the admin account on the internal SSD becoming non-functional. However, that’s also dependent on the T2 chip itself being functional, and also that the T2 would still allow an external boot drive if the internal SSD is bricked. AFAIK, we do not know what system checks the T2 chip performs prior to allowing external boot drives.
The reality is the SSD’s are extremely reliable (for all the complaining about Apple hardware on the forums, SSD’s failing is almost non-existent). Personally, I use filevault on all my drives, so there’s not really any
practical security risk in allowing external boot drives.