But financing of the production up to its completion date is the responsibility of the producer—if the film goes over budget, the producer must pay the difference themselves or go back to the studio and renegotiate the deal.
Studios, on the other hand, typically do not like their contracts being factored at banks or shopped around to independent investors and financiers, as this ultimately gives the producer significant creative latitude over the production.
With the money assured, a producer has a free hand to make the film however they please, and they are only answerable to their investors, which in this scenario are unknown to the studio at the time of the contract.
In this particular case, the studio had creative disagreements with the director over choice of star, content, and duration, and failed to resolve these issues to its satisfaction, because the negative pickup had essentially granted Milchan final cut.
The studios and distributors will contain this risk by offering the negative pickup contract only to a production that has financiers, a script, and key creative personnel, particularly the director and stars, already attached.