What challenges did the church face in the 12th century?

It's important to remember that when we speak of the church in the 12th century, we refer only to the Catholic Church, as the Protestant reformation had not yet occurred. The church faced several challenges in the 12th century. Among these were the crusades, the reformation of monasticism, and the perceived threats presented by unorthodox movements that broke off from the main body and doctrines of the church.
The First Crusade in the 11th century resulted in the Christian recapture of Jerusalem and the Holy Land. In the early 12th century, the church faced the challenge of the consolidation and governing of the crusader states. After Muslims captured the town of Edessa, a new crusade known as the Second Crusade was initiated in the mid-12th century. This crusade was mainly unsuccessful, trying and failing to conquer the city of Damascus. Later, near the end of the 12th century, the Sultan of Egypt, Saladin, recaptured Jerusalem from the Christians, and a third crusade was launched. This crusade was unable to retake Jerusalem, although a treaty was secured that allowed unarmed pilgrims to visit the holy city.
In monasticism, the Cistercian Movement sought to purify monastery life through a return to more strict observance of the Rules of St. Benedict. This for the most part succeeded. Not only did monks once again become involved in field work and other forms of manual labor, but they also copied and kept ancient manuscripts, preserving literary works that would otherwise have been lost.
Two movements that threatened the Catholic Church's total control in 12th century Europe were Catharism and the Waldensian Movement. The Cathars, also known as the Albigensians, believed in two gods or spiritual principles, one good and one evil. They also rejected the sacraments of the Catholic Church. The Waldensians believed in strict poverty as a path to spiritual perfection. Both of these movements were intensely persecuted by the church.