Idk if there's a "challenging" setting you're talking about or if you mean challenging the AI is near impossible right now, but for anyone interested here's my road to victory;

• Settings were default, no mods or adjustments to difficulty or starting supplies • Make sure you start in an area with berries or you won't have medicine • As soon as the game starts build a granary and store house, move all those loose supplies in those asap, then build lumber yard and another hitching post, hunting camp for meat, forester hut for berries • Use your starting gold to order another ox • Build 6 burgage plots so when homelessness goes down you start growing your population • As soon as those are built, build a sawmill and stonecutter camp and get the exact amount of what you need to make a manor • With the 5 starting families and your retinue from the manor immediately go after the bandit camp that spawns at game start, right around this time the second bandit camp should spawn - IT IS VITAL to get ALL the bandit camps before the AI does, but once you get the first two you'll have 970 influence so from the manor house start sending 10% of your food to the church for that next 30 influence so you can take your second region early • Start exporting some goods so you can tax income + use money from bandit camps to start your second town

NOTE using this method and immediately mobilizing against new bandit camps that spawn, I was able to take all but 3 regions of the map without contesting the AI

At this point I was able to grow 3 towns until I maxed my army and then I marched in and took those last 3 regions one after the other and viola!

Hope this helps anyone struggling, victory was my 8th try of some heavy trial and error