Run a GPUpdate or wait for the policy to refresh.
If you want to save the current files to a different location, you can open the full Save As window by selecting. By default, if you are signed in, files will be saved to OneDrive.
Thankfully, whether you use the apps with an Office 365 subscription or the standalone version, such as Office 2019 or Office 2016, and you store files locally, it’s possible to set “This PC” as the default location to save documents on your device. You may still be using Network drives or prefer to save to a different location locally on your PC by default. When you go to save a document in Microsoft Office 365, the default location is set is to save to OneDrive instead of the local computer or a network share.